Corporate Defamation: A Perspective on Analyst Reports

In 2008, Bank Atlantic, a Florida based bank, sued a prominent Wall Street analyst over a report on potential bank failures titled “Who’s Next?” The Bank stated that the analyst had defamed the bank by suggesting that it might fail. Bank Atlantic had previously sued ABC over a news report in 1991. In 2009, Hertz Global Holdings Inc., sued an analyst for defamation over a report that Hertz claimed, suggests that the world’s largest car rental company could go bankrupt.

More recently, in 2020, Binance, one of the world’s largest digital asset exchanges, filed a defamation lawsuit against Forbes Media LLC. Binance’s claim states that: “Forbes published numerous false statements about Binance, claiming that it created a corporate structure designed to ‘intentionally deceive regulators’, and engages in activity ‘characteristic of money laundering’. All such statements are false and highly defamatory.”

Closer home, Edelweiss filed a USD 100 million defamation suit against Moody’s Corporation, a global rating agency, before the Bombay High Court for misreporting its numbers in one of the firm’s investor reports. In May 2020, Moody’s published a report titled “Economic Slowdown Worsened by Coronavirus will Exacerbate Liquidity Stress”, comparing asset quality and liquidity of various non-banking financial companies (NBFCs). Edelweiss alleged that Moody’s published an incorrect report with malicious intent to create panic among shareholders and damage it’s brand and share prices.

A Harvard Business Review article from its 2007 issue[1] states that “in an economy where 70% to 80% of market value comes from hard-to-assess intangible assets such as brand equity, intellectual capital, and goodwill, organizations are especially vulnerable to anything that damages their reputations”. It was further stated that companies with strong positive reputations tend to attract better people and are often perceived as providing higher value.

It takes years of effort and diligence for corporations to gain the trust of their contemporaries, their customers, investors and all their stakeholders at large. For that fundamental reason, the trust and reputation earned by a company is invaluable to its business as well as its existence. It cannot be evaluated and stripped down to a mere number or valued in terms of money. Therefore, when this reputation is called into question in the court of public scrutiny, companies must have the right to preserve as fiercely as one would preserve their hard-earned property, and perhaps even more.

Corporate Defamation

Under the English Common Law, a corporation is entitled to sue for defamatory statements, which may affect their reputation and are further also entitled to recover damages without the need to prove special damage.[2] In National Union of General and Municipal Workers v. Gillian,[3] a distinction was made regarding trading and non-trading corporation. While a trading corporation could pursue an action against defamation, affecting its trading business as well as its reputation, a non-trading corporation could only pursue action in case of reputational damage. In Jameel v. Wall Street Journal Europe Sprl.,[4] the House of Lords definitively ruled that corporations need not prove any special damages in a defamation claim.

In Jameel v Wall Street Journal Europe Sprl, it was observed by the majority of the bench that reputation is something that must be valued and further, two of the judges on the bench opined that that corporate reputation is a valuable asset. In Metropolitan Saloon Omnibus Co. v. Hawkins,[5] it was held that a corporation is entitled to sue for defamation “by which its property is injured”. In Dixon v. Holden,[6] a broader view of property was taken: “What is property? One man has property in lands, another in goods, another in a business, another in skill, another in reputation; and whatever may have the effect of destroying property in any one of these things (even in a man’s good name) is, in my opinion, destroying property of a most valuable description.”

The primary reason why any corporation should have the right to preserve its reputation boils down to the following: corporate reputation should be treated as property. To a company, its reputation is everything.

The understanding of defamation developed in common law, from the basic right of a person to preserve their reputation. It is a jus in rem, a right enforceable against the world at large. In India, there is no statutory definition of defamation. It usually consists of the following elements: (i) an untrue spoken/ written expression/ sign/ visible representation; (ii) referring to specific person(s); (iii) is published/ comes to the knowledge of other persons; and (iv) is deemed harmful/ likely to harm the reputation of an individual.

Defamation is usually of two kinds: libel and slander.

(i)  A libel is a ‘publication’ of a false and defamatory statement, tending to injure the reputation of another person without any justification. The element of publication means that the defamatory expression must be made in a medium, which is permanent in nature, like in writing, printing, pictures, etc.

(ii)  A slander is a false and defamatory statement by spoken words or gestures, tending to injure the reputation of another person. Just words are enough to constitute defamation.

For constituting defamation, a statement need only have the tendency to affect a person’s reputation, it need not actually lower it. The applicable standard is that of “right-thinking members of the society”.[7] If a statement is such that ordinary members of the society perceive it to lower the reputation of a person, then that is enough to be defamatory.[8]

In India, defamation is a criminal offence, recognised under Section 499 of the Indian Penal Code, 1860 (“IPC”).

Whoever, by words either spoken or intended to be read, or by signs or by visible representations, makes or publishes any imputation concerning any person intending to harm, or knowing or having reason to believe that such imputation will harm, the reputation of such person, is said, except in the cases hereinafter expected, to defame that person.”

The gravity of the offence of defamation under criminal law is a lot higher than in common law. In criminal law, the statement must be made with the explicit intent to arouse the hostility of another person to be considered defamatory. In BRK Murthy v. State[9], it was stated that “in brief, the essentials of defamation are, first, the words must be defamatory; second, they must refer to the aggrieved party; third, they must be maliciously published.” The express intent behind an action, is therefore, critical in the offence of defamation, as recognised under the IPC.

In Union Benefit Guarantee Company v. Thakorlal Thakor[10], it was held that words used in a manner to negatively reflect upon a company in relation to its trade and business, with the intent to cause harm to the company, are actionable without proof of special damage. In case the defamatory statement refers to the character or reputation of its officers, special damage must be proved.

Similarly, accentuating the importance of “intent” in establishing defamation, the US Supreme Court in the case of New York Times v. Sullivan[11] ruled that public officials are prohibited from suing for defamation over false statements made regarding their official conduct, unless the statement was made with “actual malice” i.e., with the knowledge that the statement made is false or with reckless disregard of whether or not it is false.

The Case of Analysts

The flipside of the right to sue for defamation is the chilling effect on free speech and expression. The right to fair criticism is a vital part of free speech. A statement based on analysis of factual information cannot be categorised as defamatory. The primary defences against a defamation charge is truth or bona fide fair criticism. The question of defamation arises only when statements are false and maliciously intended.

In the case of financial analysts, they are experts who are adept at analysing and identifying issues in relation to corporations. For instance, in the Veritas-Indiabulls case, the Delhi High Court was highly critical of Indiabulls’ treatment of the Vertitas analyst who attempted to bring to light issues in the governance/ operation of the company through a report titled ‘Bilking India’. The case was disposed of by the single judge bench, stating that “such a reaction in the face of publications and articles written by researchers could have a “chilling effect‟ on publishing. Moreover, such litigation could also result in genuine researchers being dissuaded from writing articles which would not be in the interest of the investing public”.[12]

It can even be argued that financial analysts are more adept at identifying industry specific issues, which might not be easily identified by regulators like the Reserve Bank of India, Securities and Exchange Board of India, Insurance Regulatory and Development Authority of India, Ministry of Corporate Affairs, etc. They also play a part in regulating the corporations conduct in the market by “calling a spade, a spade”, essentially putting the onus on corporations to assess their practices or risk losing shareholder/ investor confidence.

The question therefore arises as to whether financial analysts should be granted immunity from the offence of defamation, on the grounds that it affects free speech, as well as impedes them from discharging their duties in a fair and balanced manner. It is true that corporate reputation is built over time and easily damaged, which puts a great measure of responsibility on an analyst to ensure that their sources are reliable and verified and their assessment – accurate. It is also true that if corporations are allowed to slap defamation charges against every analyst who says anything against them or their practices, it will deter analysts from being proactive in their work. A financial analyst’s bread and butter depends on his or her right to free speech, and the freedom to exercise it. However, a blanket immunity from defamation charges will not be justified in the event a false report is ever published by a financial analyst. Therefore, every case will have to be analysed for balancing between the right to reputation and freedom of speech in the face of public interest and corporate reputation.

[1] Robert G. EcclesScott C. Newquist and Roland Schatz, Reputation and its Risks, available at:

[2] South Hetton Coal v. NE News [1894] 1 QB 133.

[3] National Union of General and Municipal Workers v Gillian, [1946] KB 81.

[4] Jameel v. Wall Street Journal Europe Sprl, (2006) 4 All ER 1279 (HL).

[5] Metropolitan Saloon Omnibus Co v. Hawkins, [1859] 4 H & N 87 at 90.

[6] Dixon v. Holden, [1868–1869] 7 LR Eq 488 at 492.

[7] Sim v Stretch [1936] 2 All ER 1237; Hindustan Unilever Ltd v Reckitt Benckiser India Ltd, ILR (2014) 2 Del 1288.

[8] B Kalyani v District Collector, Villupuram, (2012) 2 MWN (Civil) 133: (2012) 2 Mad LJ 881.

[9] BRK Murthy v State, 2013 Cr LJ 1602 (AP).

[10] Union Benefit Guarantee Company v Thakorlal Thakor, (1935) 37 Bom LR 1033.

[11] 376 U.S. 254.

[12] M/S Indiabulls Real Estate Ltd. vs M/S Veritas Investment Research Corporations and Ors., (2019 SCCOnline Del 8204).