The Road Less Travelled: Reassessing Derivative Action Suits In The Indian Legal Landscape

BalaGanesh R & Jayestha Kamboj, Jindal Global Law School, India.

ABSTRACT

Board of directors and majority shareholders manage and control the affairs of a corporation, apprehensions naturally arise amongst the minority when the directors and the majority shareholders begin to act contrary to its best interests. The corporation, being a juridical person cannot act autonomously, when the Board acts with malice it becomes an instrument enabling oppression and mismanagement. Derivative action allows an interested party to act on behalf and for the company protecting its interests, it is a recognized common law remedy which has evolved ever since the courts of equity in England pronounced the verdict in Foss v Harbottle, thereby becoming a remedy serving the corporation’s interests rather than shareholder redressal. The paper attempts to argue that codification of derivative action in India could improve the corporate governance ushering in transparency and accountability thereby increasing investor confidence in doing so.

Keywords: Corporate Governance, Derivative Action, Mismanagement and Oppression, Common Law, Judicial Trends, Codification, Comparative Analysis, Policy Proposal.