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Corporate disputes- The cacophony that leads to melancholy.

A stitch in time saves nine. But often that does not happen for sure. Lack of timely arbitration or mediation will lead the parties to the Court rooms where the corridors are long, tiring and expensive to pass through- of course not for their counsels- but certainly for the parties. There are umpteen number of litigations which are still resting in the dusty court rooms or remote servers waiting for their turn to be heard and –of course- settled. The number of litigations in corporate sector is sky rocketing with cobwebs created by the legislations. The most common corporate litigations are based on regulatory issues such as compliance, procedural and tax related matters. But the most prominent numbers which are being dealt with by the Corporate courts are mainly on Insolvency related matters and matters arising out of oppression and mismanagement.

Though we all are the vocal admirers of the majority rule quite often the acts of majority can be harsh, burdensome and cruel on minority. Under the company law there are many provisions to protect the interest of minority shareholder when they are getting oppressed by the majority shareholders. The minority shareholders who felt oppressed by the act of majority can approach the National Company Law Tribunal(“NCLT”) to seek a redressal. The NCLT is duty bound the put an end to the matter after hearing both the sides and at the end will render justice. Both the sides shall have their own justifications for their deeds and shall pull out the cats from thin air to win the show. But the man hours and money to be burned out to reach that justice is humongous and hilarious. The energy and money which are to be creatively invested in the path to nurture the growth of their entities are getting wasted in court rooms. The counsel who present the case before the court to its satisfaction will win the war at least for a day. The very next day the ego injured person will run to the appellate body, National Company Law Appellate Tribunal, for reversal of the justice in their favour. The cat and mouse game often ends up at Supreme Court where the matters will find it end. Insolvency and Bankruptcy Code (“IBC”) is a new piece of legislation which was brought into the light with an intention to create a better credit culture in the country. Any law in our country is not destined to be made simple and the IBC was also not an exception to that. The new law spurred lot of litigations and the halls and corridors of NCLT and NCLAT are now flooded with black coats, anxious debtors and desperate creditors. The cat and mouse game had begun there in no time and question of rendering justice itself is a question mark in front of the litigants.

We have seen the Ambanis fighting each other and fights of Tatas, for getting the better piece of the cake, and many more similar cases in last couple of years. But end of the day who had got justice and who benefited out of it remains as a concerning query. Those cases came to lime light due to the prominence of their names in the corporate world. There are numerous litigations happening across the nation in plenty of corporate houses, whether it is family managed or professionally managed. If you look for the root causes of those disputes, the lack of confidence among the parties will pop up as the main culprit. If we dig bit more deeper, it can be seen that the lack of transparency had mooted the lack of confidence. By adhering the governance principles and standards the confidence can be build up among the stakeholders and fellow board members. The failure to adopt proper governance practices will pay its price at court rooms.

The court rooms are known as temple of justice where justice is delivered to those who are deprived of it. However, that is not a place where we should go every time for each and every matter. All disputes are not happening due of ego but ego will definitely lead to disputes. Once a difference of opinion is identified the Board should step in for early resolution of the same before it spreads to the other management organs of an organization. All court matters are not destructive in nature. The procedural matters such as corporate restructuring, reduction of capital etc are purely procedural in nature and the said matters cannot be avoided. However, the litigations due to oppression can be easily avoided by establishing proper governance practices.

Authored by Bijoy P Pulipra

BijoyPPulipra© 2019 | Picture Courtesy : Internet images

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