The Hindu Business Line : Resigned to poor information?

IT IS UNFORTUNATE that the question of Mr Anil Ambani's status on the board of Indian Petrochemicals Corporation (IPCL) has been reduced to a soap opera instead of remaining an issue of corporate governance that it undoubtedly is. Consider the sequence of events: Mr Anil Ambani submits his resignation in the first week of January and announces it too. The company responds a few days later by informing the stock exchanges that its board had met, considered the letter of resignation and decided to request Mr Anil Ambani to reconsider his decision. Nothing further is heard until a couple of days ago when newspapers report that the Mr Anil Ambani's name does not figure in the list of members of the IPCL board. Then there are reports of a communication from the Bombay Stock Exchange seeking clarification on his status. To which the company replies that it has already informed the stock exchange about the acceptance of Mr Anil Ambani's resignation as early as January. To compound matters reports appear of Mr Anil Ambani saying that he still has not heard anything from the company about his letter of resignation.

It is still not clear if the BSE got the purport of a routine communication from the company so badly wrong or that the company is guilty of a bit of obfuscation. But this much is certain: The reputation for oversight that stock exchanges enjoy has taken a knock considering the manner in which the controversy has unfolded and can be remedied only if these institutions take the issue to its logical conclusion so that the truth is revealed to the investing public. It is ironic that there must be so much confusion over whether Mr Ambani has resigned and if he has, the date from which he has done so, when the legal position itself is so clear. It is a settled principle of law that the resignation from directorship takes effect as soon as it is tendered and the question of the board accepting it does not arise at all. There may even be certain contractual commitments binding the director to serving a fixed period. While this may give rise to a civil claim for damages in the company's hands, it does not undo the legal effect of resignation.

This is as it should be. After all, a person appointed to the board is cast in a fiduciary role vis-a-vis the company's shareholders. When such a person mentally disengages himself from that responsibility, evident in the notice of resignation, it is fair that he should be freed forthwith of that responsibility and, equally, the shareholders should be informed that the person whom they appointed is no longer available to serve them in that capacity. This principle is really at the core of separation of ownership and management, implicit in the corporate form of organisation. It would not be far wrong to say that the bizarre twists and turns to what must be a simple matter of a director resigning from a board owes a great deal to the on-going battle between the Ambani scions for control of the family stake in the group companies. But the rights of minority shareholders should not be compromised in consequence.

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