Photo of Molla Hasan

Principal Associate in the General Corporate Practice at the Mumbai office of Cyril Amarchand Mangaldas, Hasan’s practice includes advising on corporate restructuring, joint ventures, private equity transactions, business acquisition, along with advisory on various corporate commercial laws. He has advised on various transactions acting for leading Indian and multinational corporations across various industry lines. He can be reached at molla.hasan@cyrilshroff.com

 

Corporate Frauds – Emerging Legal Architecture & Judicial Trends

Corporate scandals and frauds in India are as old as the hills. The 1950s witnessed the infamous LIC/ Mundhra scam, which was the first major financial fraud of the independent India. Frauds continued with an alarming regularity thereafter in every decade – the infamous Harshad Mehta, Ketan Parekh, Sahara, and Satyam scams are just a few of them. These frauds were investigated by the law enforcement agencies under the relevant provisions of the Indian Penal Code, 1860 (IPC). The Companies Act, 1956 did not have any separate definition of ‘fraud’. Legally, it was not necessary to have a separate one as Lord Macaulay’s IPC adequately dealt with all such crimes. The Companies Bill, 2008 was the original legislative proposal to replace the Companies Act, 1956 basis Dr. J.J. Irani Committee Report (Irani Report). The Irani report did not have any recommendation for a provision like Section 447 dealing with frauds. It seems the intervening major corporate scandals of 2007-08 led the Parliamentary Standing Committee to recommend two new legislative changes:
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Claw back clauses in Employment Contracts - A new tool to fight corporate misfeasance

The 2008 financial crisis made it possible to revisit contractual clauses of employees, especially those governing remunerations of executives in financial institutions. One of the clauses that gained prominence was the clause pertaining to ‘clawback’. Broadly speaking, clawback clause refers to an action for recoupment of a loss. It means the refund or return of incentive or compensation after they have been paid. The purpose of such a clause is to claim back unfair enrichment that has happened to an employee. Such a clause acts as a form of insurance and was originally applied in cases of misstatement of financial results or fraudulent acts by employees, but over time, the scope of this clause has gradually expanded.
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Coronavirus - COVID19- Faqs

The World Health Organisation (WHO) declared COVID-19 as a “pandemic” on March 11, 2020.

The outbreak and the rapid spread of COVID-19 has sent shock waves across global markets. It has disrupted supply chains, leading to the closure of several manufacturing facilities globally; serious disruption of air and sea traffic and closure of vital air routes, like the one between the US and Europe. This is turn has led to the collapse of stock markets around the world, leading to the loss of billions of dollars, which got wiped out in a matter of days. A combination of all these factors has led to a decline in the overall volume of global economic activity, forcing the world economy towards a possible recession. It is forcing Boards across the globe to confront a host of difficult questions on how business should be conducted during a global public health crisis.
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