Drafting sessions for writing securities offering documents in India can generate passionate debate. At times, such debates are over conventional risk factors that talk about civil unrest, violence, a fractious polity and political instability in India potentially holding out material risks to the business of the company issuing securities.
Officials of the Securities and Exchange Board of India are rumoured to be upset with merchant bankers for projecting a negative picture of India. There are 'patriots' in the ranks of merchant bankers and law firms too who consider such risk factors to be 'anti-national'.
Risk factors highlight to investors the risks they face by investing in the securities offered. In foreign jurisdictions, where manufacturers of guns can face damages claims for manufacturing a product that can cause death, law suits against Indian companies for not fully highlighting the risks to the conduct of business emanating from the environment and societal circumstances in which they are based, is a distinct possibility.
Putting investors on notice about the state of affairs through the risk factors ensures that in such litigation, the Indian issuer would be able to demonstrate that it made the investor fully aware of all possible risks, and therefore, the decision to invest was an informed one.
While a lot of risk-factor writing has become a template activity, one is often tempted to reconsider if the depiction of Indian circumstances ought to change. After all, India has never seen such near-pristine times in its world standing. However, a reality check would be in order. And our polity never fails to provide such reality checks.
Last week, in India's commercial and business capital, hundreds of pre-scheduled evening meetings were cancelled. Office-goers left for home early. Many of them did not find local taxis to fly them. The reason: a politically inconsequential political party with a name Maharashtra Navnirman Sena, decided to make the headlines a year ahead of the next elections. The party, whose name and actions suggest it is the Marathi-speaking Maharashtra's 'revivalist army', took to the streets to protest against the influx of 'outsiders' into Mumbai.
The party's minions abused attendants at a rally organised by another political party called Samajwadi Party, which, too, is quite inconsequential in Mumbai and is more known for its presence in the Hindi-speaking north-Indian state of Uttar Pradesh.
The attack presented fertile political soil for both parties. A minor civil war loomed. Skirmishes between the two parties were reported. A few vehicles were burnt. A large number of single-taxi-owning taxi drivers who depend on their vehicles for their livelihood nervously kept off the streets. My Maharashtrian maid servant recounted stories of north Indian bus passengers being thrown out by fellow Marathi-speaking passengers for not being able to provide precise change to the Marathi-speaking bus conductor. Suddenly, Mumbai seemed to be threatened with a repeat of the 1993 communal civil-riots.
The founder of the Maharashtra Navnirman Sena, Raj Thackeray, was widely quoted in the media and his commanders were seen in media footage overseeing the attacks. The state government dithered in arresting and charging Raj Thackeray, publicly wondering if they at all had a case for arrest.
He dared them to arrest him, and declared that he would not even apply for bail. Eventually, faced with the risk of alienating north Indian votes, not just in Mumbai, but all over India, the local Congress government effected a token arrest. His bravado of staying behind bars too was quickly history -- he simply chose to post bail and to go home to sleep on his comfortable mattress instead of staying the night in custody for the Maharashtrian cause.
In a virtual real-life parody, the local leader of the Samajwadi Party courted arrest hoping to get political mileage from it, but was turned away by the cops. The Shiv Sena, the Maharashtra-based Hindu nationalist party, from which Mr Raj Thackeray had splintered to form his party, and which has been indicted the most by the Justice Srikrishna Commission for its role in the 1993 civil riots, first supported the north Indians.
Within days, the Shiv Sena was compelled to hedge its bets by attacking the 'anti-local' policies of the south-Indian company that is re-building Mumbai's domestic and international airport.
Is this truly a society governed by the rule of law? The force-fitted Anglo-Saxon style Indian Constitution that legally binds together a multi-lingual bunch of peoples, is constantly put to test. For now, the risk factors about India's domestic polity, are here to stay.
The author is a partner of JSA, Advocates & Solicitors. The views expressed herein are his own.
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