Atul Raj, Advocate, Delhi High Court
ABSTRACT
The concept of corporate governance in companies emerged in the western countries in the 1970s with the objective of preventing the promoters from conducting the affairs of the company for their personal gains as well as that of their family and to introduce a degree of transparency, accountability and ethics in the companies. In India, the concept gained popularity in the wake of globalization in the 1990s as it came to be accepted that public generally responded positively to companies with efficient, well managed system. In India, most of the prominent business houses, such as Reliance Group, Tata Sons& Infosys, family ownership or concentrated ownership of some people remains very much common which is a potential reason for mismanagement of such companies. An attempt is made in this paper to argue how promoter driven companies are likely to abuse the corporate governance which could result in mismanagement of company by their controlling behaviour. This paper is divided into three chapters where firstly, the paper would give an introduction tracing the origin of the concept of corporate governance, examining the reasons which made this concept popular in western countries and inspect the intent of the Indian legislature in adapting the same by studying the Kumar Mangalam Birla Committee report and JJ Irani Committee report. Second part will discuss various cases like the Tata- Mistry tussle, the promoter- CEO conflict in Infosys, collapse of Jet Airways amongst other companies to show how continued grip of the controlling members of company led to its mismanagement and debilitating the role of its independent directors. Finally, this paper will discuss the provisions in the current Indian legal framework, with particular focus on the role of SEBI, which has been working towards preventing fraudulent diversion of funds by promoters, and the lacunae in such laws which are required to be addressed.
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