Gujarat’s other calling card

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Safe assets

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Upholding law

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SummaryChurchill referred to “the subordination of the ruling classes to the settled customs of the people”.

Ratan Tata is right that govt approvals are sacrosanct. How do you reconcile this with Court action?

Churchill referred to “the subordination of the ruling classes to the settled customs of the people”. Scholars ranging from Niall Ferguson to Francis Fukuyama attributed the industrial revolution to these very principles—pre-eminence of the law helped spur “widespread ownership of property”, and provided incentive to make something out of it.

Ratan Tata, while talking of how the government needed to give an “irreversible commitment” that the law of land had sanctity, had some more specifics to offer. In an interview to PTI, he said, “You get FIPB approval to invest in India … and then three years later the same government … tells you that your licenses are illegal and that you have lost everything”. If India doesn’t give a commitment that government approvals are not to be taken lightly, he added, “India would be taken lightly”.

Though Tata hasn’t mentioned any company by name, it’s apparent he is talking of Telenor’s purchase of a stake in Unitech’s telecom license after getting an FIPB approval. While this case isn’t quite the same as the Malé expropriation of the GMR airport since the telecom licenses were cancelled by the Supreme Court, there is a larger issue here for investors. Telenor, for instance, paid a market price for its share of the company which had a valid license from the government of India, and certainly those who funded the company just got caught up in something they had no hand in. Tata’s is not an easy question to answer, but clearly someone in the government needs to be thinking about a solution. The Torrens title offers one such solution where the state compensates those who buy land in good faith based on official land records. Perhaps some version of that is worth looking at.

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