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Reports that Ness Wadia, son of Wadia Group Chairman Nusli Wadia, has been sentenced to two years’ imprisonment by a Japanese court for possession of drugs have stirred up a hornet’s nest with legal eagles calling for changes to the Companies Act to tighten corporate governance standards.
The two-year sentence of 47-year-old Ness, heir to the diversified conglomerate Wadia Group, has been suspended for five years, a report by British daily Financial Times said.
The news of Wadia’s arrest and conviction had a major impact on the stock prices of Wadia Group entities with companies such as Britannia Industries, Bombay Burmah Trading Corp Ltd, Bombay Dyeing and National Peroxide taking a beating.
Ashish Kumar Singh, Managing Partner at law firm Capstone Legal, told BusinessLine that as per the Indian Companies Act, a person has to vacate his position as a Director if he is convicted by a court of any offence, whether involving moral turpitude or otherwise and sentenced in respect thereof to imprisonment for not less than six months.
However, there is a caveat under the “definition of courts”. “The definition of courts is not proper as it has no mention of any foreign courts in it, and hence, the sentencing by the Japanese court will not have any impact on his (Wadia) Directorship,” Singh said, adding that it is about time that the law is changed to empower the Central government to interfere in matters likes these to protect the larger interest of shareholders. Another lawyer, on condition of anonymity, said that possession of drugs is a serious offence. “How can investors rely on a Director who is on drugs,” he asked. Prem Rajani, Managing Partner at Rajani Associates, said that there are several provisions available in the Companies Act under which action can be taken against a person under the above-mentioned circumstances. Referring to the case involving Chanda Kochhar, former MD of ICICI Bank, he said that Kochhar had to step down on the basis of charges alone, while in Wadia’s case he has been convicted and sentenced.
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