Letter from the Editor
Indian investors are often taken for a ride by unscrupulous middle-men, brokers, insurance agents and even their own friends. Few fight back, as Dilip Modi did. He fought and won an arbitration case against Destimoney Securities. We document his case in his own words to show you what it takes to win such cases. But the real benefit of Mr Modi’s story is that it tells you the precautions to take to ensure that you don’t land up in a soup like he—and many others—did. He is retired and had the time and tenacity to pursue his case. We are not sure how many others can do the same. We also analysed arbitration statistics and found that winning arbitration cases is heavily stacked against investors. In our Cover Story, we offer tips and advice on what one must keep in mind and what one needs to be careful about.
 
In her Crosshairs section, Sucheta talks about the saga and fall from grace of Air India, once the pride of the Indian skies. It has now sunk to a point of no return and is likely cost us Rs30,000 crore to merely make it relevant and keep its planes in the skies. It is a horrific story of how bureaucrats and politicians have collectively looted the airline, something that mirrors the state of our governance. Moneylife Foundation organised a discussion on how civil aviation policies have selectively benefited some people at enormous cost to the taxpayers.
 
In her Different Strokes section, Sucheta highlights how ‘look out circulars’ (LOCs), to stop people from leaving the country, are issued and grossly misused to trample over human rights and dignity, and even harm honest people.
 
Moneylife Foundation played host to KK Ramani, an eminent advocate on real estate matters, to a packed house; many people had to stand for lack of space. Mr Ramani raised many pertinent legal and financial aspects of housing societies’ administration which are important for every citizen of Maharashtra, especially Mumbai. We have written about it for those who missed the event. Do check out the video on the Foundation’s website.

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Caretaker Governments?
This letter is about the allocation of business rules in government departments and the delegation of powers and proactive disclosure. The Government has allocated its business to various ministries through these rules, but, in fact, this delegation of power has not been done strictly in tune with the demands of democracy.
 
Since there is no specific distribution of business amongst ministers and secretaries of different grades, the situation remains confusing. An elected government is expected to take policy decisions, hear public grievances in respect of policies, schemes and law. But such matters received are miscarried by the secretariat without the approval of competent ministers/ public representatives. The permanent executives are engaged to assist the public representatives in arriving at a decision. But they do not have the authority to finalise a policy matter. Only a caretaker government is debarred from decisions on policy matters. But the sorry state of affairs today is caused by a complete confusion about devolution of powers in a coalition government.
 
In our system, permanent executives are expected to work freely within the four walls of policies, schemes, rules, regulations and acts framed by public representatives. But public representatives take extraordinary interest and interfere in the day-to-day working of permanent executives for unholy reasons.
 
I would like to draw your pointed attention to the scheme of delegation of administrative powers in State Bank of India (SBI). There is a 100-page booklet which defines the limitation of power for each category of personnel in the Bank. It covers subjects like—signing of letters, power to initiate and defend legal proceedings, purchase of electrical, fixtures and furniture, grant receipts against deposits, disciplinary matters pertaining to various grade of staff, incur expenditure for newspapers, stationery, sanction of loans, etc. This ought to be replicated in the government at various levels of ministers and secretaries, so as to avoid any confusion. Such delegation should be made public by notification on website of the concerned department/ organisation. The legislative secretariat should also be included for the purpose, where the arrogance, as I have experienced, is the highest in the matter of public petitions airing the crucial issues.
 
The discretionary powers exercised in Bank are subject to report and review by senior functionaries. The officers in banks hold charge of files, valuables, cash and documents, and powers from head clerk to chairman are very explicit for exercise. Therefore, the officers of banks are responsible and accountable for discharge of duties. While the power to sanction a loan rests with officers at lower level, the discretionary power to reject a loan application by weaker sections can be exercised at one step higher level only. The loan documents remain in custody of an officer in banks. But, in courts, these are held by the civil clerk. Even the material things–cash, receipt book and other valuables said to be in double lock are virtually held by clerk-cashier of courts.
 
The missing of ‘coalgate’ files is also a result of the faulty procedure adopted in government offices, since nothing is likely to happen to senior functionaries, because they are not custodians of any crucial matter.
 
The officers in judiciary, police and administration do not hold charge of anything barring a few exceptions. The charge of any file, valuables, etc, are held by clerks in these organisations. The state functionaries are highly irresponsible. Yet, they draw hefty salaries and perks for no role and responsibility. Therefore, the SBI model should be adopted in administration, police and judiciary of the country to make them responsible to public, and to instil fairness and transparency in the working of the government.
 
The power to reject any public petition should be exercised by an authority one step higher than the authority empowered to accept it. This will infuse accountability and prevent abuse of power and position by key functionaries in the administration.
Mani Ram Sharma, by email
 
Protection for the family
This is with regard to “Use the Married Woman Property Act To Safeguard Your Life Insurance Policy” by Raj Pradhan. My question is: Can an existing policy be registered under MWPA? If not, why? If yes, why? Also, if yes, then, can this wonderful provision also not be misused to defraud creditors?
Harish Dayani, by email
 
Raj Pradhan replies: The answers are in the article: (a) The procedure is simple, but it has to be done at the time of buying the policy; (b) if you decide to go in for Section 6 of Married Woman Property Act (MWPA), do it only for genuine reasons. If the life insurance policy has been purchased with an intention to defraud creditors, the protection under MWPA may not work. Creditors can assert their right to get paid out of the proceeds of the life insurance policy. The idea is that the welfare of wife and children are protected with utmost care.
 
The reason why it is not popular is that the policyholder of a MWP policy loses all control over the policy with the exception of paying premiums. The policy becomes a trust property (wife and/or children). MWPA can protect the life insurance death claim benefit from creditors and ensure that your wife and children are secured. Lack of awareness and loss of control prevents insured from going for this option.
 
Section 6 of MWPA allows an individual to buy a policy for himself under the Act and create a trust for the same. There is no need for creating a trust under the Trust Act. The beneficiaries (wife and/or children) can also be trustees. A MWP insurance policy is free from creditors and court attachments. The welfare of wife and children are protected with utmost care. A policy under MWPA is a good feature for families that have debt.
 
‘Rich Man’s Investment?’
I am a retired person and have recently started subscribing to Moneylife. I was wondering if Moneylife could help the investors of Osian Art Fund. Art investment is generally perceived as a rich man’s investment and, therefore, has not got the type of publicity that stocks or commodities get. While this may be true, there are quite a few retired people like me who have invested in the Osian Art Fund.
RK Chandrashekar, by email
 
Moneylife’s intervention has helped scores of people get back anywhere between 85% and 100% of the principal invested. But the matter is now with the Securities Appellate Tribunal after SEBI finally woke up to the need to initiate action. We understand that no payments have been forthcoming since then.  Mr Chandrashekar, you, by your own efforts have also received 85% of the principal. Now, that you are a regular reader of Moneylife, you will notice that we strongly advise people not to invest in unregulated financial products. We are also pushing the Reserve Bank of India to stop banks from selling third-party products, especially where they take no responsibility for the appropriateness of the product to the needs of the savers. – Editor.
 
 
The Matter Simply Dies!
This is with regard to “State’s (Maharashtra) ministers extravagant flight plans: Dr Patangrao Kadam leads the march, annual expenses on flight expenses touches Rs2.10 crore”. It would be interesting to know the purpose of these ‘travels’? What was the result? If you study the helicopter (chopper) rides, many are for short distances and for doing odd jobs, even like ‘opening ceremonies’ which could have been accomplished using the cars allotted to them!
 
These people  do not care for public money being spent in such a reckless manner because nobody questions and nothing happens after such questions are raised in public. Some flimsy explanation is given and the matter simply ‘dies’ and gets buried in the
files!
Dr Anantha K Ramdas
 
Plans to Borrow Abroad in Jeopardy
This is with regard to “Raghuram Rajan's tough battle against bubbles” by William Gamble. I believe Dr Rajan is absolutely correct. The companies mentioned in the article are financially weak and can easily default putting plans of good corporates to borrow abroad in jeopardy. This may also affect India's credit rating. We should be watchful now; better to suffer in the short run and be safe in the long run!
Anil Agashe
 
Set Right by Legislative Fiat!
This is with regard to “Many top companies fail to carry out quality corporate governance”. Thanks to InGovern, the breaches in the good governance practices, which were shoved under the carpet, all along, are coming out in the open. Compliance requirements are being breached by the so-called high-n-mighty of our corporate world with gross impunity. This is distressing and needs not only to be condemned but also set right by legislative fiat.

Nagesh Kini

 
Make the Government Accountable
This is with regard to “Youngest RTI activist from Gujarat becomes the youngest Sarpanch” by Vinita Deshmukh. This is citizenship in its true form. Wish more and more people get into this flow and make the government accountable!
Ramchandran
 
Approaching Elections?
This is with regard to “Reliance D-6 Mela: Need for specific commitments backed by performance guarantee!” by AK Ramdas. This is nothing but a way to pressurize Reliance to give more political contribution to the present government, as elections are approaching near.
Himanshu Gandhi

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