Clawback And Malus Provisions In India: Contractual Validity, Regulatory Frameworks, And International Comparisons
- IJLLR Journal
- 10 hours ago
- 1 min read
Abdul Hannaan Siddiqui, Presidency University, Bengaluru
Suhail Ahmad, Presidency University, Bengaluru
ABSTRACT
Disputes around executive pay being too high or unjustified have been a major issue and this has pushed companies to find ways to react even before shareholders express their dissatisfaction; clawback clauses are one such measure. Generally, these clauses permit a company to reclaim bonuses or other forms of payment based on incentives in the event where senior management is discovered to have been involved in misconduct, falsification of financial results, or violation of their fiduciary duties. In a number of jurisdictions, most notably in the U. S. and the U. K., clawback and malus provisions are no longer matters of private contract only but are supported by comprehensive statutory or regulatory frameworks. India's position, however, is rather scattered. Apart from the banking and NBFC sectors, where the Reserve Bank of India has issued specific guidelines on variable pay and malus provisions, the majority of Indian companies are dependent on voluntarily added clawback clauses in executive employment contracts. This situation gives rise to two interlinked questions: one is about the legal enforceability of such clauses under Indian contract and labor law and the other is related to whether they actually contribute to the prevention or discouragement of corporate misconduct. The present paper discusses these issues through an inquiry into the contractual rationale and regulatory handling of voluntary clawback clauses in India, with special reference to the Chanda Kochhar ICICI Bank case which reveals both the potential and the constraints of such measures.
