Sucheta Dalal :Getting new teeth (21 Sep 2003)
Sucheta Dalal

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Getting new teeth (21 Sep 2003)  

Ever since the demise of FERA, the Enforcement Directorate (ED) has been chafing at the inadequacy of its powers. The mandate to administer the Prevention of Money Laundering Act will however give it back some of its lost teeth and track down cases such as those of Dinesh Dalmia’s DSQ Software.

DSQ has been served with several show cause notices in connection with Dalmia’s Mauritius-based Overseas Corporate Bodies (OCBs) under the Foreign Exchange Management Act (FEMA), but the ED has also begun a fresh investigation into possible forex violations in connection with his acquisition of an American call centre company called Aegis Communications (reported by The Indian Express paper last week). In particular, the ED wants to investigate a Post Office Box in Tortola, British Virgin Islands, linked to several of Dalmia’s overseas business activities.

Curious deals

DALMIA’S US shenanigans are being unravelled this time in a series of articles by NY Post columnist Christopher Byron. In his latest column, Byron says that the auditors of Dalmia’s UK-based company bulked up their balance sheet by 16,000 per cent by claiming to have bought DSQ Software’s Texas-based, US operations for $10 million.

Byron, however, discovered that payment for the acquisition that was made through a London company never found its way to DSQ India as it ought to have. And the Texas subsidiary continues to be shown in the Indian balance sheet. Dalmia, it would seem, also acquired Aegis Communications out of the P.O. Box account in Tortola.

The irony is that with DSQ Software’s high profile board having quit and its institutional shareholders reluctant to ask any questions, we have an excellent example of the redundancy of Sebi’s elaborate good governance codes. Sebi has been curiously inactive in the DSQ case.

The stock exchanges that list the DSQ Software stock can do little more than demand perfunctory compliance with Clause 49 of the Listing Agreement since they have no powers to verify the information or lack of it. Unless the Department of Company Affairs (DCA) investigates the DSQ group and its many operations and subsidiaries in India and abroad, DSQ will remain free to concoct explanations for every situation.

Mumbai Calling

Chief Minister Sushil Kumar Shinde said that ‘Mumbai City is a fine example of partnership of private enterprise and government support’ and that his aim was to ‘strengthen the synergy of this partnership’ to ‘accelerate’ its development. And corporate India has immediately lined up a variety of plans to ‘transform Mumbai into a World Class City’.

His enthusiasm, as opposed to his predecessor’s sad drought of ideas and indifference is a welcome development. So, the Mumbai Debate will re-start on Monday, when the McKinsey study, commissioned by Bombay First is formally presented to the Chief Minister. But other industry segments may have different priorities. For instance, the Information Technology people think the situation is already very grave. Nasscom has scheduled a brain storming session to debate whether ‘the Commercial Capital of India in danger of losing its status’ on September 26, and find ways to achieve the Mumbai Vision. Obviously, industry is enthused by Shinde having set up a panel of industrialists to suggest a rehabilitation plan for those hurt and killed by the recent Mumbai blasts.

While Shinde’s initiative and industry’s upbeat response are both positive signs, translating it into action requires strong political will. After all, remember that the first Mckinsey report (prepared for SICOM) was unceremoniously mothballed when Sharad Pawar was the CM. His Nationalist Congress Party dominates the ruling coalition too.

Backward brigade

While industrialists debate how to make Mumbai a world-class city, we already have one good indicator of how tough the transformation is going to be.

Striking employees of the Airports Authority of India (AAI) want to block the government’s decision to hand over management of the Mumbai and Delhi airports to private industry. The decision was part of a larger plan to privatise and develop both airports into world-class aviation hubs. But AAI employees have come up with the astounding suggestion that India does not need world-class airports.

Why? Because, according to the AAI union, a majority of people have not even seen the inside of an aircraft, developing world class airports would lead to social upheaval. The self-interest of the Unions is clearly out of touch with changing reality and social aspirations in India’s metros. Far from creating social problem, most shopping malls, food courts and entertainment hubs are creating enormous employment opportunities for people with minimal literacy standards. But the government and industry need to launch a major public communication exercise to convey the benefits of world-class infrastructure to the people and to ensure that such critical development is not dismissed as elitist projects.

-- Sucheta Dalal