M Veerappa Moily has said that a ‘campaign by vested interests’ robbed him of his former role as law minister. Now minister of corporate affairs, he tells India Business Law Journal that he will be a ‘mother to the corporate world’
In a cabinet reshuffle on 12 July, India’s law minister, M Veerappa Moily, was moved to the Ministry of Corporate Affairs. Sitting in his new office on the fourth floor of Shastri Bhawan, a building that houses several ministries in central Delhi, the soft-spoken lawyer and Congress politician from Karnataka gave his second exclusive interview to India Business Law Journal.
India Business Law Journal (IBLJ): When you were moved from the Law Ministry to the Corporate Affairs Ministry in July, you expressed your displeasure at the move and blamed a campaign by vested-interest groups who opposed certain reforms you were pursuing.
Moily: No. No. I am quite happy now. Past is past. Now I don’t want to reopen that chapter. I forgot it.
IBLJ: In our 2009 interview, you spoke passionately about facilitating faster and more affordable justice. What did you manage to do about it before leaving the Law Ministry?
Moily: Within two years of my taking charge of the Law Ministry, we had put that [programme] into operation with a US$ 4.7 billion investment in manpower, infrastructure and everything else. A programme was launched on 1 July this year for the disposal of 40% of pending court cases, or more than 10 million cases, by 31 December 2011. This involves systems including the e-courts project and there is also a second phase in which another 15 million cases may be resolved. Such a thing has never happened before and I am getting a very positive response from everybody including the judiciary. According to a survey conducted by the National Judicial Academy in Bhopal, only 4% or 5% of justice-seeking people approach the judiciary. The rest go to other places to resolve disputes, due to which we have the Naxalism insurgency and the Mumbai underworld. With the efficient disposal of the cases, we will open up hopes that [turning to the] judiciary is the best course of action for any citizen to obtain justice and all these conflicts will disappear.
IBLJ: What are your key priorities in your new role as minister of corporate affairs?
Moily: India’s corporate world is going through a transition. Foreign direct investment is going down and the domestic corporate world is having some kind of a crisis. We have to meet the aspirations of the emerging corporate world as our companies don’t confine their activities only to domestic trade and manufacturing, but have expanded internationally. My idea is to restore confidence by addressing some of their sensitive problems and creating a situation for sustainable and innovative development.
IBLJ: A rewrite of the Companies Act has been in the offing since 1993. Successive governments have introduced bills, most recently in October 2008, but nothing has come of them. What is happening at the moment and when do you think the country will have a new companies law?
Moily: To bring in a new companies law is my first priority. The last time a new bill was introduced in parliament, the standing committee suggested as many as 300 amendments. There was no point in just patching up so many amendments and therefore a new comprehensive Companies Bill is taking shape. We have already incorporated suggestions from other ministries and forwarded it to the Law Ministry. After some fine-tuning and approval from the cabinet, I plan to present it in parliament. It will be a state-of-the-art bill that will comprehensively take care of present and emerging problems.
IBLJ: What about other laws that are deficient or problematic and in need of your attention?
Moily: We are also comprehensively amending the Chartered Accountants Act, the Cost and Works Accountants Act and the Company Secretaries Act.
IBLJ: And the Competition Act? Are you taking any steps to iron out the contradictions in the act, such as those reported in the June issue of this magazine?
Moily: We need to address the issues that have come up, but we have not yet formulated any amendments. If there is any lacuna or inadequacy, I am here to address it.
IBLJ: It has been two decades since India began demolishing its barriers to foreign investment, yet as we frequently report, many investors still endure long delays in receiving the necessary approvals to invest in the country – sometimes even years, as we have seen in the case of the Korean steelmaker Posco. There appears to be a crisis in decision making. Why is this so?
Moily: It is because our Land Acquisition Act is 116 years old. In the colonial era they wanted to acquire the land by force, and even today, farmers’ interests in land acquisition always come last. That law is no longer relevant, which is why there are a lot of conflicts. Farmers who lose their land want [compensation at] market rate, employment and also equity in the industry. The rehabilitation, the relief and also the resettlement of farmers is more important than merely acquiring the land for a small sum of money. We have already drafted a land settlement and rehabilitation bill.
Shelter without bias
IBLJ: The release in 2010 of secretly recorded telephone conversations between a corporate lobbyist (Niira Radia) and various government officials offered a chilling glimpse of the influence that vested-interest groups can wield at the heart of government. How do you handle pressure from vested-interest groups and professional lobbyists?
Moily: My ministry will be just like a mother to the corporate world – impartial, objective and caring. The corporate world should feel free and comfortable with this ministry. It has the potential to provide shelter to everyone without any bias, partisanship or narrow-mindedness.
IBLJ: But how will you deal with powerful people who push you very hard?
Moily: The work will not be done by pushing it. We have laid down the objective criteria and parameters. I am known for this in my previous positions as the chief minister of Karnataka and as the union law minister. I will put everything on auto-pilot so that the [official] discretion will be the least and nobody will be able to meddle with the actual functioning and the flowchart of the work.
IBLJ: In December last year, your predecessor as minister of corporate affairs, Salman Khurshid, advocated consultations with the ministries of Home, Industry, Commerce and Law to consider introducing a law on corporate lobbying. What are your views on this?
Moily: I don’t know in what context he said that, but there is no question of legislating. I don’t think what is good for United States would be good for this country also and we must evolve our own corporate governance philosophy. Corporate lobbying should not perpetrate any vested interest created within the corporate world. That fear, however, does exist.
IBLJ: In that case, does the situation necessitate more efficient implementation of current regulations? You have already spoken about creating a special cadre of officials for the regulatory bodies. What difference would that make and what are you trying to achieve?
Moily: We must have a professional cadre of regulators and not just traditional bureaucrats in the regulatory bodies, particularly in multidisciplinary bodies like the Special Fraud Investigation Office (SFIO). Although we cannot avoid taking people on deputation from other departments, such as the Income Tax Office, we need duly trained and professionally ready regulators. I would like to make the Institute of Corporate Affairs, which is already functioning, a state-of-the-art institute for training regulators for the SFIO and the competition commission. The regulatory regime will come to play a bigger role in the Ministry of Corporate Affairs.
Bracing for stricter oversight?
IBLJ: Does this mean that businesses should brace themselves for increased controls and stricter oversight?
Moily: [The regulatory regime] is to facilitate and not to police. We are here as friends of the corporate world.
IBLJ: You have also mentioned that you would like to redefine India’s approach to corporate social responsibility (CSR). What is the approach that you are recommending?
Moily: CSR is not a mere charity but a social business. India has 300 backward districts where no investment goes due to the lack of skilled manpower and basic facilities like electricity, roads and water. I am asking all industries to create the basic infrastructure facilities so that these areas can become potential business places.
IBLJ: Does this mean that you want to expand the definition of CSR to include the building of roads and the provision of water?
Moily: Yes, providing the minimum infrastructure facilities.
Entry of foreign lawyers inevitable
IBLJ: The restriction on the entry of foreign law firms into India has been a contentious issue for a long time. When you were law minister, you told India Business Law Journal that the entry of foreign lawyers would become a “non-issue”. What is your position on the subject now?
Moily: Ultimately nobody can prevent it. We have to be exposed to that. Some time back, the UK resisted US law firms coming into the UK, but later on found that to be to their benefit. India can’t be passive spectators in the international game of corporate expansion and will have to reach out. Expansion will yield to excellence, which will in turn yield inclusiveness.
IBLJ: What will be the first step to allowing foreign lawyers to enter India?
Moily: Firstly, we have to sell the idea of foreign lawyers to our own lawyers. It will benefit them. It will also benefit the profession, competency-wise, quality-wise and quantity-wise. There is lot of wealth within corporate law firms and Indian lawyers should have a share in it. You cannot just close your eyes and say I don’t want to be part of it. Ultimately who will be the loser? This is the point the lawyers should think about.
IBLJ: As India Business Law Journal will be reporting this month, it has become common practice for government ministries to engage private law firms to assist with the drafting of legislation. Some observers have expressed reservations about the practice, highlighting the conflicts of interest that may arise when commercial lawyers draft the laws on which they will advise private clients. What are your views on the subject?
Moily: I agree that government should own the responsibility of drafting the law after taking the entire nation into confidence. The lack of consultation leads to conflicts, while better consultation will lead to a better and a smoother implementation of law. The days are now gone when laws were drafted while sitting within the four walls or talking to some consulting firms.
IBLJ: Are you in favour of hiring private lawyers for law drafting duties?
Moily: I am proud to say that we have an excellent legislative department, which has all the skills needed to draft a law. Inputs and consultations are necessary, but I don’t think that any other agency or a law firm is better.
IBLJ: The drafting of the Lokpal Bill involved wide-ranging consultations and the unprecedented involvement of civil society groups? Do you see this as a positive development?
Moily: Now the process is much better. That is why the government thought it fit when Anna Hazare [an anti-corruption campaigner] and his team wanted to be the part of the law drafting committee. Such consultations have not been done in many other cases. In the end, out of 40 principles set out by them, the government accepted about 34. The other issues are related to the separation of powers under the constitution and we are not ready for a constitutional amendment.