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Has the Centre, by keeping the main shareholder directors out of the NCLT petition, sought to shield them from future punitive action for their role in the blowout at infra lending player IL&FS?
Many corporate law experts and economy watchers think so, and felt that an escape route may have been provided by the government to some of the main shareholder directors by not naming them as respondents in the NCLT petition moved under Section 241 and 242 of the Companies Act, 2013.
The contention is that the main shareholder directors – not mentioned in the petition – will not be liable for any penal action in the days to come, if the government, or their parent organisation, were to proceed against them, they said.
“How can the Corporate Affairs Ministry distinguish between shareholder directors and other directors. Under the Companies Act, there is no difference between a nominee director and an independent director. Why (then) the discrimination in filing petition against directors,” a corporate law asked.
In the petition moved before the NCLT, the Centre had left out Praveen Kumar Molri (nominee director of LIC); Kiyoshi Fushitani and Harukazu Yanaguchi (nominee directors of Orix Corporation, Japan); Sanjeev Doshi (nominee director of Abu Dhabi Investment Authority); Bijendra Kumar Singhal (nominee director of Central Bank of India) and Chalasani Venkat Nageswar (nominee director of State Bank of India). These nominee directors represent institutions that in aggregate control nearly 75 per cent equity in the core investment company and systemically-important non-banking finance company, IL&FS.
The government petition only named Infrastructure Leasing & Financial Services; Hari Sankaran; Arun K Saha; Sunil Behari Mathur; Ravindra Chandra Bhargava; Michael Philip Pinto; Jaithrith Rao; Rina Kamath; Ravi Ramaswamy Parthasarathy; Maharudra Manohar Wagle (Chief Financial Officer) and Varsha Shivaji Sawant (Company Secretary) as respondents.
Not including the names of the nominee directors (shareholder directors) as respondents in the petition is like saying that they were functioning properly, and only those named were to be brought to book, experts noted.
Amarjit Chopra, former chairman of National Advisory Committee on Accounting Standards (NACAS), said: “I see no reason to differentiate between the nominee directors and other directors when it comes to suspension of the board. All the directors should have been named as respondents.”
He said that the responsibility of the board is collective, and there can be no pick and choose there.
“To me, directors representing the various shareholders and regulators should have rather been more diligent and vigilant as they were representing certain interests and had the responsibility to protect the same. Their role was more of a watchdog for their organisations and could have asked for the information which they deemed fit,” said Chopra.
On the contrary, independent directors had access to lesser information than these directors, he said.
“Not naming the shareholder directors as respondents rather would give other directors a ground of the Centre being biased towards the shareholder/nominee directors and would weaken the government’s case against the other directors,” said Chopra.
Conduct of directors
Aseem Chawla, Managing Partner, ASC Legal, a law firm, said that the NCLT ought to rule on the conduct of every individual director before it decides to exercise the power under Section 242 with regard to removal of a particular director.
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