When it comes to corporate governance infractions at India Inc, the more things change, the more they remain the same. The confidential probe report by a former CBI official investigating the death of VG Siddhartha, the founder-promoter of Café Coffee Day Enterprises, traces a familiar pattern of an over-ambitious promoter funnelling a listed company’s funds into numerous unrelated ventures, taking on excessive leverage for expansion that proved impossible to repay and pledging most of his personal assets in the bargain, while key stakeholders — lenders, the shareholding public and marquee private equity and institutional investors — remained passive bystanders to the company’s rapidly deteriorating financial position. The report has harsh words for ‘every watchdog that refused to bark’ including the company’s auditors, who failed to rein in the excessive risk-taking even after it became a threat to the company’s status as a going concern.

Several aspects of this case bear striking parallels to previous corporate governance scams that have rocked India Inc. The CCD promoter’s propensity to maintain a pincer-grip on all financial decisions, his easy mingling of company and personal funds and multiple finance teams working in silos to bypass internal audits and controls, are reminiscent of the modus operandi that Ramalinga Raju employed to window-dress Satyam Computer’s books. Its voracious appetite for debt-funded expansion and diversion of funds into unrelated ventures recalls the Mallya-Kingfisher Airlines saga to mind. IL&FS, after it collapsed, was found to own a labyrinth of subsidiaries that hid its unsustainable debt position from lenders. In fact, given that this saga has had so many precedents, it is disturbing that neither regulators nor lenders could read the warning signs early enough to pre-empt the collapse. Despite being empowered to take the promoter to task, CCD’s board members and institutional investors seemed to have ‘charmed’ by his larger-than-life personality into rubber-stamping his flawed decisions. Internal and statutory auditors seem to have been content with offering their opinions on the parent company’s financials while ignoring the information vacuum on subsidiaries. Lenders appear to have been happy to throw good money after bad well after the debt position turned unsustainable. Arm’s length certification proved to be little deterrent to related party dealings that resulted in private entities owing over ₹3,500 crore to the listed firm.

Overall, this case suggests that the tightening attempted to India Inc’s corporate governance through recent amendments to the Companies Act and SEBI’s LODR regulations, have proved to be of little avail in preventing rampant malpractice. The answer to better governance seems to lie, not in placing excessive onus on independent directors to certify good behaviour, but in strengthening the composition of corporate boards by reducing the promoters’ say on appointments, forcing institutional investors to take a more activist role in governance and handing out more stringent punishments to auditors where there is evidence of gross dereliction of fiduciary duties.