Why did the Micromax founders get arrested and what can we do about it

Micromax founders arrested – what does it mean?

In India, businessmen are used to greasing the government machinery to get things done. That’s how things have been run. The founders of Micromax got arrested this week for allegedly trying to bribe INR 30 lakhs to a municipal corporation of Delhi.

This is unlikely to have much direct impact on the company – especially since it seems the bribing was not connected with the business of the Company – but it will certainly wreck havoc to the reputation of the founders – Rajesh Aggarwal and Manish Tuli.

I am sure in course of doing business, many of you regularly come across these challenges – where you either pay a bribe or forego the business. What do you do?

This is especially crucial for companies having foreign investment – the founders, and even the investors / parent company can be prosecuted in countries like USA or UK for bribing and kickback in India under US or UK laws. You may remember how the Walmart India CEO got fired a few months back.

There are two types of demands for bribe and kickback – one is from the government, and the other from private entities.

Say your construction is found to be in violation of a municipal law – the norm is to pay a bribe and get it regularized on paper. You are bribing a government official here – which is illegal in India.

The other situation arise in course of B2B businesses – when an employee or director of a client you want to work with demands bribe to act favourably. This is not yet outlawed in India – though this coming to light can ruin careers. This also may be punishable in another country if either you or the client has foreign investment or significant shareholding.

What can be done to deal with this?

Build a reputation as anti-bribery

Although we work a lot with government bodies, so far no one has demanded a bribe on my face. I like to believe that the company is run by a bunch of lawyers help. Building a reputation that you will not play ball can definitely help with corrupt officials and managers. Build a reputation for making their life difficult if they ask for bribe. You may lose out on some business – but it is possible to build a business without paying bribes. I have worked with several clients who could strike fear in the heart of corrupt officials – because they almost always dragged them to the court at the drop of a hat. Whenever lawyers are involved, especially in big size deals, officials act very carefully – and because of this, big companies often engage lawyers from very early stages to negotiate.

Report demands of bribe

You can do this quite easily for government officials – just drop a mail to the Central or respective State vigilance commissions. You can do this anonymously. If you are more ballsy, get demands of bribe recorded – and intimidate the official.

From Central Vigilance Commission’s website:

If you are dealing with state government officials, you can report to the appropriate state vigilance commission.

What else could you do? You can register an FIR in a police station. If Police refuses to take your complaint, even better – send it to the SP of the district or Police Commissioner by registered post, the type that delivers a delivery acknowledgement back to you. The police will then have to start a case under Prevention of Corruption Act – all these are very good to strike fear in the hearts of corrupt officials. They may get away but no one will ask for bribes to you again. This is of course, a strategic decision and not an emotional one – be on watch if you are planning to do this. 

Challenge fraudulent allocations/ tenders in the court

You don’t need proof that an allocation was improper to file a case and delay everything. If you have a good case, you’ll get the tender to be re-administered. If you feel something is unfair about a government tender, challenge it in the court. This will make the life of the officials involved quite miserable. They are secretly scared of litigious parties that may challenge their tender process and allocation – apart from making them run to the court – these draw attention of people higher up, and everything is likely to be opened and scrutinized. Corrupt officials hate that. If they know a party may go to the court and make a ruckus, they behave well.

 Also remember that government cannot buy anything above the value of INR 5,00,000 without calling for tenders.

Learn to be strategic

The system is kind of broken – but you can still get through it without if you are strategic. Don’t give up. Big companies make things work for them by using a team of lawyers – which you probably don’t have access to. You must build up your own knowledge of the law regarding government tenders and procurement laws. It’s not that complicated once you start paying attention to it.

It is difficult to find everything you need to know in one place, or in a language that you can understand without legal training – so we included a module on this in our Business Law course for Businessmen: Entrepreneurship Administration and Business Laws offered by National University of Juridical Sciences. If you regularly face sticky legal issues, check it out.

Not paying bribe is a way of life – or a way to do business. In my opinion, if you don’t want your name splashed on the front page of newspapers for wrong reasons, it is the only way to do business. If you are not ready to pay bribe, it does not mean that you cannot do certain kind of businesses – but it means you may have to ruffle some feathers. Do you think Tata pays bribes while taking up government projects? My experience says no – but they ruffled enough feathers for people to not mess with them anymore.