DNA Money Edit: Independent directors need immunity when firms sink

India Inc, which is going through the endless process of expanding Boards with independent directors, is in a dilemma following a recent Supreme Court judgment that restrained Jaiprakash Associates's independent directors from transferring any personal assets as one of the group companies faced insolvency proceedings at the National Company Law Tribunal (NCLT) for not being able to payback more than Rs 2,000 crore to homebuyers. The apex court restrained independent directors and promoters and their family members until the group's real estate arm Jaypee Infratech deposited Rs 2,000 crore to protect the interest of homebuyers.

Is it t fair to place the entire onus on independent directors who are only privy to the information shared by the management? Many believe that it is the management and promoters who should be penalised, while some hold the opinion that independent directors are bound to monitor company's operations closely and that they cannot alienate themselves from company issues.

Several independent directors on Boards of companies are now seeking legal advice to find out to what extent they can be held liable for any operational issues in those firms. Independent directors should ideally enjoy immunity unless they are partners in the crime. The order may put a brakes on the ongoing efforts to implement recommendations by Uday Kotak Committee on corporate governance.