The Hindu Business Line : On the trail of a failed bank and the trial that followed

IN THE `hall of fame' on www.invent.org is Rangaswamy Srinivasan, for his discovery in 1981 "that an ultraviolet excimer laser could etch living tissue in a precise manner with no thermal damage to the surrounding area". He called the phenomenon Ablative Photodecomposition (APD). Two years later, Srinivasan collaborated with an ophthalmic surgeon to develop APD to etch the cornea, and the result is what has benefited millions of people ever since: LASIK surgery to reduce dependency on corrective lenses.

Here is Srinivasan turning his focus on a different subject in The Fall of Arbuthnot and Co. from EastWest Books (Madras) P Ltd (ewb@touchtelindia.net). It is the story of a `bank' that failed about a hundred years ago; it employed about 12,000 people, and depositors, comprising the Presidency's rich, numbered 7,000 and deposits added to Rs 2 crore. "The furore that followed the collapse became an important part of the history of Madras and of the British Empire in India," writes Srinivasan in the prologue.

The company was not a fly-by-night operator. It had a 100-year history; it used to pay "a handsome interest of 5 per cent on its fixed deposits," and it used the funds in commercial activities such as manufacturing and estate running. "After the suspension of payment by the firm, the next shock that the Madras public received was the news that Mr P. Macfadyen, who was a partner in both the Madras and the London firms, had committed suicide." His body was fund in a tunnel of the railway, and the jury returned a verdict of `suicide during temporary insanity'.

Failed depositors included charitable, missionary and public institutions "left without a single rupee to carry on business and to meet their daily expenses," as the Madras Mail editorialised on October 23, 1906. A `relief fund' was started to help the destitute, with contributions from the general public. A letter to the editor, in November, from one Mr Pollard said, "This failure will make the native chary of investing any of his savings in Banks or Joint Stock Companies. He will go back to the old-fashioned way of converting his savings into jewels or of hoarding his coins in some secret hiding place."

Srinivasan compares the way the media dealt with the issue. "Not one of them dared to say a word directly against the character of Sir George Arbuthnot! They kept referring to `the Firm' and to `the Management' but never Sir George by name. The same newspapers, which were edited by Europeans for European readers and which had previously cautioned against `hasty judgments' and `finger-pointing', now wrote caustically about everything except Sir George!"

But this one was different, from The Hindu, that "lived up to its reputation as `the Thunderer' for its stinging editorials": On November 26, 1906, it wrote, "We hope that the Madras Government, who have shown, if we may say so, a somewhat serene indifference to the scandalous disclosures which have been made, will take steps to see that Sir George Arbuthnot and others responsible with him for the business of Arbuthnot & Co and its collapse, are arraigned before a criminal tribunal and placed upon their defence."

Through the book that kicks off from the microfilm records stored in the British Library, Srinivasan tracks the work of his grandfather Mr T. Narasimha Iyengar, who played "an important role in the court proceedings" that followed the crash. The bulk of the book chronicles the trial, which should make for a great read for accountants.

"In estimating the profit for the year, ought any sum reserved for dividends to be included or not?" asks the Chief Justice. Elsewhere, a question is posed thus: "Do you say, as an accountant, that, in the drawing up of a balance sheet, you can allocate all the money for other purposes and leave no money available for a note which the Bank might call upon for payment within ten minutes, being an `on demand' note?"

Riveting read!

Economics without tears

A NINE-LETTER word that most accountants distance themselves from is economics. Price of such neglect is costly, both for the practising professional and the employed, because the accountant usually ends up getting relegated to narrower areas such as taxation and finance, rather than being offered foothold in strategy formulation and macro modelling. Which is why it is relevant to read the latest edition of Uma Kapila's book, Understanding the Problems of Indian Economy, from Academic Foundation (www.academicfoundation.com).

The author has taught the subject "for as many as 42 years" and so you can bet on being patiently guided through the labyrinth of economics, laid out in 29 chapters ranging from development to poverty, from public sector to world trade.

Unlike the typical textbook that bores readers to no end with outdated statistics, Kapila's work has current numbers.

For instance, the chapter on the nature of Indian economy cites data from the World Development Report (2005) — that in 2003 `low income countries' accounting for 36.8 per cent of the world population contributed only 3 per cent to total World GNI (gross national income).

And, if on land reforms, you expected to read only about zamindari system and so forth, you could be in for surprise when Kapila adds value with current numbers such as that up to March 31, 2003, only 2.12 million hectares of ceiling lands had been redistributed accounting for "just 1.5 per cent of the total cultivable land in the country."

There are ample insights too, to guide policy. Such as, that existing ceilings on land ownership could be reviewed "where irrigation facilitates two to three crops a year."

Kapila adopts an easy style, so you learn economics without tears. There are two major concerns, she writes, on the impact of globalisation. "These may be described as even fears. Under each major concern there are many related anxieties."

For those who don't want to remain in the ranks of the economic illiterate!

BooksOfAccount@TheHindu.co.in

More Stories on : Accountancy | Books of Account

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
A comeback for FM radio

Don't stymie services-led growth

Creative accounting can turn source documents into works of abstract art

Far from fair value

On the trail of a failed bank and the trial that followed

Of tapped phones and pravasi lectures

Lesson from IPO scams

Quality education

NRI privileges

Development vs people

Food security