Class action suits by shareholders in India

Author:Dishi Bhomawat
Position:National Law University, Jodhpur, India
Pages:414-426
SUMMARY

Purpose As a part of the overhaul of the corporate governance norms, the Indian Government recently introduced class action suits for shareholders in India. This paper aims to analyze the efficacy of the existing legislation in its present form. It also examines whether the Indian law is equipped to handle the globalized markets, wherein shareholders are spread across different continents.... (see full summary)

 
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Class action suits by
shareholders in India
Dishi Bhomawat
National Law University, Jodhpur, India
Abstract
Purpose – As a part of the overhaul of the corporate governance norms, the Indian Government
recently introduced class action suits for shareholders in India. This paper aims to analyze the efcacy
of the existing legislation in its present form. It also examines whether the Indian law is equipped to
handle the globalized markets, wherein shareholders are spread across different continents.
Design/methodology/approach The paper relies on meta-analyses. This study analyzes the
existing case laws, news reports and legislative materials.
Findings – The author, through her analyses, has concluded that the introduction of class action suits
into the Indian corporate governance regime is only a half-hearted attempt. The Indian lawmakers have
failed to learn from their foreign counterparts. There are no provisions to deter frivolous litigation.
Furthermore, it is contentious whether the Indian law will be able to cater to transnational class action
suits.
Originality/value This paper is original. There is a scarcity of literature on Indian corporate
governance norms. This paper examines the very nascent concept of class action suits in India. India
has become an investment hub in the past decade. Therefore, this paper has practical implications in
understanding the Indian legal setup, in comparison to its foreign counterparts.
Keywords Corporate governance, Shareholders, Corporate crimes, Transnational, Class action suits
Paper type Research paper
1. Introduction
Class action litigation is a representative form of litigation. It has been a popular tool in
the USA since the nineteenth century. The success of class action suits is demonstrated
by increasing recognition and popularity of class action suits beyond the USA (Allen
and Overy, 2011). In India, the Companies Act, 2013, brought in the provision for class
action suits on behalf of shareholders and depositories.
Class action suits may be a new phenomenon in the country. However, they are here
to stay. In fact, the Government is now planning introduce class action suits for
consumers as well[1].
This paper aims to assess the current provision on class action suits. The author
argues that while the introduction of this remedy is a welcome move, the provision is
ambiguous and leaves much room for confusion. The provision is silent on certain key
issues, which is capable of adversely affecting the efcacy of the provision.
Section 2 of this paper focuses on the need for class action suits in India. In Sections 3 and
4, the author has discussed the advantages and disadvantages of class action suits in
India. Section 5 is an attempt to highlight the problems inherent in the Indian version of
The author wishes to thank Mrs Amita Bhomawat and Mr Jitendra Bhomawat for their constant
support and guidance.
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1359-0790.htm
JFC
23,2
414
Journalof Financial Crime
Vol.23 No. 2, 2016
pp.414-426
©Emerald Group Publishing Limited
1359-0790
DOI 10.1108/JFC-09-2015-0052

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