PPP – Public Private Partnership or Profit for Private Players? Role of Drafting
A few days ago a friend at CaClubIndia asked a query for improving drafting skills. I delved on his query before formulating my response to it. In our profession soft skills are often found missing. With focus on balancing the debit with credit and goal seeking income with tax payable, we barely spend anytime or effort on improving our presentation or drafting skills. As a result we end up losing the creamy investment banking to MBAs and continuous stream of documentation and due-diligence assignments to lawyers.
This article lays emphasis on importance of drafting skills for Chartered Accountants. With New Companies Act Providing for more responsibilities and consequent liabilities on CAs, the importance of drafting skills cannot be undermined anymore.
One good example of loss on account of improper drafting is discussed below for your appreciation:
In a recent CAG audit report tabled in the Parliament, CAG indicted the Institute of Genomics and Integrative Biology for signing the PPP agreement which favored the private partner without adequate safeguards for government interest.
According to the report, Institute of Genomics and Integrative Biology (IGIB) negotiated an agreement with Chatterjee Management Services (CMS) to set up Centre of Genomic Application (TGCA) in the upscale South Delhi locality of Maharani bagh. Unusually, the agreement gave the private player the right to use the building for 21 years if the project, for any reason, became unviable. This clause is now likely to deliver the premises, A new six-storey building on 10.75 acres of government-owned prime land to CMS as the TCGA activities were suspended since 2011 after the project began incurring losses.
Value of Land? - Mere Rs 3,000 crores!!!
CAG also reported that proper due diligence was not carried out in selection of private partner; IGIB didn’t wait for its own consultant before selection of private partner; and that adequate provisions were not made in the contract to safeguard government interest.
Beauty of the report is that DG, CSIR branded CAG as bunch of “auditors are generally graduates who don’t understand science.”
This is not the only case of improper drafting causing one party or the other to lose big money. History is full of such cases.
I once lost a pretty good some of money because I badly drafted defined terms of engagement for one of assignment. So client happily walked away without paying!!
Therefore, there are important lessons to be learned:
1. Improper drafting can cost your client a fortune. So kindly give due importance to the language used, specially for covering clauses such as liability, revenue recognition, termination, cost overruns etc.
2. Develop a habit of regularly writing on legal and financial issues. This shall help in streamlining your thoughts, reduce errors, improve presentation and above all reduce scope for misinterpretations.
3. Another good habit to develop is of reading. This will help improve help you in maintaining required amount focus when reviewing voluminous contract documents.
4. Remember a CA, if works hard, is better positioned to replace both the lawyers and MBAs, provided if desired level of presentation and diligence is achieved.
Nikhil kaushik, ACA
Tags :Corporate Law