BATCH 2019-24

SYNOPSIS
Topic

“Corporate Governance under Companies

Act: Case Study”
Corporate Governance

Submitted to: Submitted by:

Mr. Rahul Nikam, Gaury Singh
ASSOCIATE PROFESSOR (CG) B. A. LLB Hons.,
FACULTY OF LAW, ROLL NO- 91901040009
MARWADI UNIVERSITY

1|Page
 Introduction
The Companies Act is a comprehensive legislative framework that governs the functioning of
companies in India. The Act lays down the rules and regulations for the establishment,
management, and operation of companies in India. It also sets out the rights and duties of
various stakeholders, such as shareholders, directors, and auditors.

Corporate governance, on the other hand, refers to the system of rules, practices, and
processes by which a company is directed and controlled. It encompasses the mechanisms
that ensure accountability, transparency, and fairness in the decision-making processes of a
company. The Companies Act and corporate governance are closely related, as the Act sets
out the legal framework for the implementation of good corporate governance practices.

Companies Act and Corporate Governance:

The Companies Act contains several provisions that are aimed at promoting good corporate
governance practices in India. For instance, the Act requires every company to have a board
of directors, which is responsible for the overall management of the company. The board is
required to act in the best interests of the company and its shareholders, and to ensure that the
company complies with all legal and regulatory requirements.

The Act also lays down the qualifications and disqualifications for directors, and requires
them to act with due diligence, skill, and care. Directors are required to act in good faith, and
to exercise their powers in a manner that is consistent with the objectives of the company.

In addition, the Companies Act requires every company to have an independent auditor, who
is responsible for ensuring that the company's financial statements are accurate and reliable.
The auditor is required to provide an unbiased and objective assessment of the company's
financial performance, and to report any irregularities or discrepancies to the board of
directors.

The Act also contains provisions for the protection of minority shareholders and for the
prevention of insider trading. It requires companies to disclose certain information to their
shareholders, such as financial statements and annual reports, and to obtain their approval for
certain important decisions, such as mergers and acquisitions.

The Companies Act also provides for the establishment of various regulatory bodies, such as
the Securities and Exchange Board of India (SEBI) and the National Company Law Tribunal

2|Page
(NCLT), which are responsible for enforcing the provisions of the Act and ensuring
compliance with good corporate governance practices.

Case Study-

 Sahara India Real Estate Corporation Ltd. v. SEBI (2012): In this case, the Supreme
Court of India emphasized the importance of protecting the interests of shareholders
and the general public in matters of corporate governance. The court also upheld the
regulatory authority of the Securities and Exchange Board of India (SEBI) in
regulating companies and protecting investors.
 LIC of India v. Escorts Ltd. (1986): This case highlighted the role of independent
directors in ensuring good corporate governance. The court held that the appointment
of independent directors was necessary to prevent the abuse of power by the
management and protect the interests of shareholders.
 Securities and Exchange Board of India v. Price Waterhouse Coopers (2018): In this
case, the SEBI banned Price Waterhouse Coopers (PwC) from auditing any listed
company in India for two years, following the Satyam scandal. The case emphasized
the need for auditors to exercise due diligence and maintain high standards of
corporate governance.
 Nusli Wadia v. Tata Sons Ltd. (2019): This case dealt with issues of corporate
democracy and the rights of minority shareholders. The court held that the removal of
Nusli Wadia as an independent director of Tata Sons Ltd. was not valid, as it was
done in a manner that violated the principles of corporate governance.
 National Stock Exchange of India Ltd. v. SEBI (2019): This case highlighted the
importance of transparency and disclosure in matters of corporate governance. The
court held that the National Stock Exchange of India Ltd. had failed to disclose
important information to the public, which was a violation of the Companies Act and
SEBI regulations.

Thus, the hereinabove mentioned case laws are to be analysed, scrutinised and assessed for
determining the role of companies act in upholding the corporate governance principles.

3|Page