The unease of doing business in contemporary India is highlighted by the unfortunate experience of go-getting IIM-A alum Shantanu Prakash who spearheaded the digitisation of Indian education through Educomp Solutions Ltd (ESL), a company he promoted in 1988, and which for quite a while was the darling of the stock market when its Rs.10 paid up equity share was quoted at over Rs.5,000 on the bourses. On February 11, the Central Bureau of Investigation (CBI) registered bank fraud cases against Prakash and directors of ESL and associated companies for allegedly defrauding the State Bank of India and a consortium of 12 banks which had loaned the company Rs.1,955 crore.
Yet as every informed individual in Indian education is aware, fraud has been perpetrated against Prakash rather than by him. ESL pioneered the digital revolution in Indian K-12 education by installing computer labs/ Smart Classrooms in more than 35,000 government schools across the country. But typically state governments inordinately delayed and/or defaulted payment, forcing the company to borrow over Rs.275 crore from SBI and other banks at extortionate interest rates of 16 percent-plus which is normative in public sector banks, reportedly nationalised in the public interest way back in 1969. Moreover, more than 6,000 private schools have defaulted and/or delayed paying the company the quarterly instalments they had contracted to pay, forcing the company into bankruptcy.
The law’s legendary delay — the judicial backlog in India’s over-burdened courts is 33 million cases — and the requirement to pay court fees have bankrupted thousands of business enterprises, including ESL. According to the World Bank’s Ease of Doing Business index, India is ranked #164 under the parameter of enforceability of contracts. Yet another visionary entrepreneur humbled by the insolence of office and the law’s delay.