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Justice and Salai Holdings Pvt. Ltd.

Justice delayed is justice denied. There cannot have been a more urgent need for this timeless wisdom to be put in practice than now in the wake of the current existential crisis Salai Holdings Pvt. Ltd., is going through. Salai Holdings is a holding company with majority stakes in several subsidiary limited companies investing in a varied range of businesses such as solar energy, emu farming, retailing essentials, dry cleaning, micro financing and more. It may be recalled the company came in the grip of the present crisis on October 29, 2019 after its then maverick founder chairman, Narengbam Samarjit, who was known for giving journalists free rides abroad during his business trips, took everyone by surprise when he surfaced in London with a colleague and declared they have formed a de jure Manipur government in exile and that Manipur was independent of India. As to whether an individual expressing his opinion on such matters amounts to a cognizable offence is another matter, but for the moment, because of the man’s provocative claim, the company he once headed is in severe crisis of possible complete extermination and under investigation by the National Investigation Agency, NIA. We hope the law takes its course and delivers justice, but we also hope this is done as swiftly as possible, for any further delay can cause irreparable harm even if the company is ultimately proven innocent. Again, as to whether a legal offence, if any, committed by any individual stakeholder in a company must reflect on the company is also not exactly clear-cut.

What is certain is, like several other start-ups in the state in the same non-banking financial market, many of them doing visibly very well, Salai Holdings has also been raising money from private investors in the name of deposits for which 3 percent interest per month or 36 percent per annum is promised. Until the current crisis benumbed it, the company also has been keeping this promise to its investors. The suspicion and presumption of many now is, this kind of interest can only be paid through what is referred to as Ponzi scheme, in which those behind the shady business entice gullible people to deposit money with the company on the promise of attractive interests. This interest is then paid chiefly from fresh deposits by fresh customers. The obvious logic is, for these schemes to keep afloat, there must be a never-ending enlistment of depositors and therefore a never-ending cycle of fresh deposits to pay the interests due to earlier depositors. There can be no question about it that this cycle would have a life span, for at some point or the other, there would be no more people gullible enough to be enlisted as depositors.

This suspicion that Salai Holdings was a Ponzi scheme is understandable, but a presumption that this is certainly so before the investigation reports are public, as many are now beginning to do, is where justice can get short-circuited unpardonably. Indeed, in a certain section, a trial by media has already begun. This is all the more reason why the government must expedite and complete the investigations into the company’s accounts at the soonest. As everybody knows, a trial by media can be as unjust and brutal as a trial by lynch-mob. It can end up with plenty of victims but no justice done at all. Hence, the longer the government takes in coming out with the full truth, the more vulnerable those at the receiving end of the gathering storm of street justice will become.

As mentioned earlier, one of the businesses Salai Holdings and other companies in the same non-banking financial market bandwagon undertakes is micro financing. This practice of extending small short duration loans to micro enterprises is well known even before these companies came into existence. The lending rates in this informal market, when it is without collaterals, can go up 4 to 5 percent a month. This means even if companies like Salai Holdings were lending at, say 3 percent per month, they would be left with margins big enough to pay the interest they promised their own lenders or depositors. This burden being taken care of, the returns from their other businesses would then leave bigger profits. The point is, this business model can certainly be self-sustaining, that is, if there is nothing illegal about the business itself. If the mode of money lending and the interests on these loans amount to usury, another relevant provision of the law will have to be invoked, but surely these enterprises cannot be punished for Ponzi. If indeed it is, then it must also be said we are looking at a deeply-rooted and widespread social practice in Manipur.

The focus of any assessment hence must be first and foremost to find out if Salai Holdings make enough profit from their investments to pay what they promised their own investors. If this equation is well balanced, surely their business practices cannot be classified as Ponzi, and unlike a Ponzi, it can continue in perpetuity and maybe even grow. The logical question that come to mind is also, whether these are larger and more organised versions of leikai marups, therefore only an extension of this informal but very popular collaborative saving mechanism evolved by a poor but resourceful and resilient society, and one which continues to serve as a vital prop for many in meeting their financial emergencies or in running their families and businesses? Can such transgressions, if at all these prove to be transgressions, be likened to Ponzi as many are now so freely and unscrupulously doing? It is with this urgency in mind that we urge the government once again to establish the facts of the matter at the soonest before these businesses and their clients are left to puerile jurisprudence meted out by street smart but legally semi-literate adjudicators.

There is another matter to be considered in the assessment of this crisis. Salai Holdings is a private limited company and not a proprietorship. This being the case, Narengbam Samarjit, the maverick, cannot be treated as synonymous with the company. From the legal point of view, Salai Holdings and Samarjit an individual stakeholder in the company, are two different legal entities. Both can be hauled up by the law but this does not necessarily mean an offence committed by one will be treated automatically as offence by the other as well. This is important, for as we are beginning to witness, boorish street trials are mixing these issues up miserably causing grave injustices to those at the receiving end, which include above all, Salai’s hapless investors. Nobody is able to say for sure yet, but given the genesis of Salai Holdings’ current crisis, it is quite likely the current investigation is more into suspected links and possible financial support the company may have been extending to unlawful organisations, and not at all about the company’s business modalities. If the suspected links are disproven after a close scrutiny of the company’s financial records, the company must be allowed to resume its businesses promptly in the interest of its many investors.

There is another angle to this problem. Why are so many ordinary people willing to risk their hard earned money in the way they have? The answer may reveal some depressing and sordid picture of the Manipur society in the present times. According to figures available at the employment exchange, at last count there were more than 7 lakh unemployed youth in the state, which makes for over 25 percent unemployment rate given Manipur’s projected current population. This means for one, there is no way the government job sector can absorb all of them. Moreover, a mid-hierarchy government job today commands a bribe price of between Rs. 10 to Rs. 15 lakhs. Under the circumstance, there must also be many who are capable of raising this Rs. 10 lakhs to compete in the bribe market for such government jobs, but feel depositing the money in these companies for a return of 3 percent per month interest on their deposits, or in real terms Rs. 30,000 per month, is a more honourable investment. The Rs. 30,000 per month they get as interest for the Rs. 10 lakhs they deposit, is also probably more than what would have been their salaries for the government jobs available for the same amount in Manipur’s infamous bribe market.

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