Unexpected realities

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A lot can change in a year. At the end of 2010 a confident India was looking to build on the successes of the past decade. Now the mood is less confident

The Indian economy has shifted into a lower gear and, with it expected to stay that way for the next few quarters, India Inc has been scrambling to shore up its defences. A continuing lack of direction from India’s policy makers, repeated interest rate hikes by the central bank and a downward-moving Indian rupee are adding to the challenges and the dominant sentiment is one of uncertainty.

Leader 1112A five-fold increase in demand for restructuring corporate debt, between the second and third quarters of the year, points to a buildup of distress within companies. While banks assess their ability to address this demand, it is apparent that restructuring is one area where two decades of liberalizing the economy have brought little change.

As our timely Cover story (Tooling up, page 15) details, India’s insolvency regime does not allow for swift turnaround and transformation. The system for revival of companies through either the courts or a quasi-judicial forum, the Board for Industrial and Financial Reconstruction, is long drawn out and has sometimes been misused to defeat the interests of creditors.

The only other option is a voluntary, non-statutory corporate debt restructuring under the watchful eye of a body representing banks and financial institutions, the CDR Standing Forum. This too does not allow for anything as efficient as the Chapter 11 bankruptcy protection in the US.

There is a lack of confidence in the existing system for revival of companies, which does not bode well for the resilience of India Inc. For in a global economy, the fortunes of a company can depend on factors far beyond the realm of its influence, and an efficient restructuring regime is vital if companies are to reimagine and reinvent themselves.

Well thought-out change is also necessary in the arena of freedom of expression and defamation law. A dispute between a television channel and a retired Supreme Court judge over what is generally seen as an inadvertent error has turned the spotlight on India’s rambunctious media industry and the tensions between the right to protect one’s reputation and the need for media freedom (Debating the right to be wrong, page 35).

As we highlight, India has an archaic and draconian criminal defamation law that can get in the way of serious journalism. Calls for reform in this area have so far gone unheeded and our timely piece draws together the current thinking about defamation both in India and in more advanced jurisdictions.

This issue’s Vantage point (India in 2012, page 22) offers predictions for the year ahead. In it, business and legal experts turn their thoughts to the challenges and opportunities that India-focused companies will face in the next 12 months. In keeping with the times, the tone is sober.

Rajiv Luthra, managing partner of Luthra & Luthra, says “regulatory uncertainty is becoming a threat to the long-term growth prospects of the country”.

Others are more upbeat. Sridhar Gorthi, a partner at Trilegal, believes “India is poised to consolidate its position as a favoured investment destination”. Shruti Sodhi, senior counsel at American Express (India), sees “what is probably a temporary aberration in otherwise an intact reality of India emerging as a global economic giant” as the fundamentals of the economy are strong.

Can this be said of India’s law firms and are they strong enough to survive the challenges of 2012? Lee Ignatius and Ritvik Lukose, of legal recruitment firm Vahura, believe problems of retaining talent will be continue to plague law firms. They suggest that creating a professional, dynamic and transparent environment at work will go a long way in retaining people. Will this be enough to keep India’s lawyers satisfied? For, this is a group of people who have many hidden talents.

As we reveal in this issue’s Spotlight (What you didn’t know about your lawyer, page 29) some of India’s best known legal eagles lead fascinating lives outside their office. While some enjoy the challenges of climbing high mountains, others focus on the pleasures of collecting objects: cigars, statues of Ganesha, and even vintage cars. Still others enjoy painting and photography. Our report is a must-read for anyone who has wondered what their lawyer is really like.

But as we describe in our annual Deals of the Year (page 39) feature, what makes lawyers really tick are the many ground-breaking transactions, court cases, and intellectual property issues that engage their minds. For the fifth consecutive year India Business Law Journal analyses and celebrates 50 of the most significant India-focused deals in capital markets, M&A, banking and finance, private equity and infrastructure, along with nine of the most significant legal disputes and intellectual property enforcement actions.

The past year saw borrowers with ties to India raising long-term debt in the US and UK markets, as they expected domestic interest rates to rise. The year also saw as many deals outbound as inbound, as companies expanded into new territories.

In highlighting these deals we once again pay tribute to the innovative skills and practical expertise of the lawyers and law firms that guided each matter to a successful resolution. Clearly they are well equipped to face whatever challenges 2012 brings their way.