Monday, 30 June 2014

Recovery of dues - need to update laws

You might have watched Amitabh Bachchan ad on tv saying that Binani Cement is 'Sadiyon ke liye' or something like that. And of course in such a case the ad-budget is not in thousands or lacs.

Binani Cement had been asked by government of Rajasthan to pay sales tax dues amounting to Rs 154 crore odd for the period 2008 - 2011.

In 2013 state government allowed the company to pay 50% amount immediately & rest in 10 monthly instalments.

The company wanted to pay tax dues in 36 instalments & approached High Court.

The High Court ordered payment of Rs 50 crore immediately & rest in 12 instalments.

Company approached Supreme Court against order of High Court for relaxation. Learned judge of Supreme Court asked the company:

'How much do you pay for one appearance of Amitabh Bachchan for your advertisement? How much you spend on ads? It must have been thousands of crores. It is only the State which is not paid.'

'What else would they do if not to take coercive action? You must pay your taxes. I don't know why we have to pamper industries which do not pay taxes.'

How would the government run the country if the industries do not pay taxes? Industries are not there only for creating employment but they are also liable to pay taxes.'

Company was asked to go back to High Court where the case is fixed for 04-07-2014.

As per website of the company, Binani group has presence in cement, zinc, energy, infra & IT. Their bankers are PNB, OBC, PSB & Syndicate Bank. Some figures from the cement balance sheet are as under:
Audited figures as on                             31-03-13       31-03-12
                                                                     (in lakhs of rupees)
Revenue from Operations (Gross)      255,553.09    233,211.14
Profit/(Loss) for the period                   11,982.48        4,839.79

Here we are discussing neither merits of sales tax case nor about management of the group & their policies. The entire episode has led to ponder over following issues which need attention of law makers.

* State, central governments, banks are helpless & weak to recover their dues. They also have to go to already overburdened courts where the cases linger on for years. Corporates do eventually get the benefit of deferred repayments, instalments or some type of waiver. In some cases they even shut the units down blaming the banks or governments for closure. Question here is that do the recovery laws need more teeth?

* Despite defaults to public sector banks, state or central governments the corporates continue their expenditure on ads to boost their brand equity. Can't the use of brand name be forfeited till recovery?

* Despite defaults in payment of their dues by the corporates, celebrities endorse their products & make money which is not ethical. Though may not be illegal. Can't there be law barring endorsement of a product of a defaulter?

* Should not the heads of such defaulter companies be debarred from contesting all types of local, state or central level public elections?

This grey area needs to be made transparent.

Grey area

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