BharatPe takes action, but should independent directors be held accountable?

Following his resignation as MD and director of BharatPe, the fintech company on Wednesday removed Ashneer Grover from all company positions. In a statement, the company accused Grover of “spinning lies and hurling baseless allegations and threats”.




The digital payment company also stated that “Grover’s family and relatives engaged in extensive misappropriation of company funds” adding that it “reserves the right to pursue legal action” against him. Grover’s disgraceful exit holds key lessons for corporate governance in India and also demonstrates dangers of vesting too much power in one person.

NSE Scam and lessons for corporate governance

The NSE-Yogi saga also opened a Pandora’s box exposing serious corporate governance lapses and violations of securities contract rule. This scam goes beyond the misconduct of one person, and implicates the NSE board members and independent directors who looked away, while all this happened. SEBI’s investigation revealed that Chitra Ramkrishna had been sending emails with sensitive information, such as organisational structure, dividend scenario to the account rigyajursama@outlook.com. Shockingly, the SEBI order also says that the board members were aware of these controversial exchanges between Ramkrishna and the so-called Yogi but they had taken a “conscious decision” to not to alert the regulator and “keep the matter under wraps”.

Various reports suggest that the controversial Yogi was none other than Ramkrishna’s former aide, Anand Subramanian. It’s surprising that board members turned a blind eye to Subramanian’s elevation as Group Operating Officer from a mere consultant. Also, the huge raise in his compensation did not catch their attention. Subramanian left the NSE only after he got embroiled in financial irregularities. This is a clear indictment of the board who were snoozing while shareholders’ interest went for a toss. Independent directors have the responsibility to monitor and report lapses and violations in order to protect the interests of minority shareholders but lately we have seen various instances where they seem to toe the promoter’s line. In reality, returns to the minority shareholders depend on the mercy of the promoter.

Amazon-FRL dispute: Did independent directors work in shareholder interest?

In the ongoing Amazon-FRL dispute, the ecommerce giant has accused the independent directors of Future Retail (FRL) of acting for the benefit of the promoters. After its Rs 7000 crore offer was turned down, Amazon wrote to independent directors (January27) saying: “It is not for the benefit of FRL’s shareholders, creditors, vendors and employees.” Amazon said it is curious that FRL now seeks to challenge the very Samara Term Sheet which was signed not only by the Promoters but also by FRL (through Rakesh Biyani, MD) after months of negotiations and discussions with Samara, which were supported by Amazon.

Independent directors, however, allege that the ecommerce company was trying to buy the Future Group’s retail assets for a lowball sum of Rs 7,000 crore when it already had a bid worth Rs 24,713 crore from Reliance Retail. Asked why it took them three years to figure out issues with the deal, they claimed Amazon’s true intent was only revealed after it made its submission before the Singapore arbitration panel. “Earlier, they have always represented that they were not interested in FRL but now we know their investment was strategic in nature,” one of the directors had said.

Independent directors turn a blind eye to Amazon’s apprehensions

Earlier, Amazon wrote to independent directors seeking a probe into related party transactions between FRL and other Future Group entities alleging “significant financial irregularities’ ‘. Their plea fell on deaf ears and independent directors rejected the request saying Amazon’s letter is nothing but “an after-thought and a counterblast to the showcause notice by CCI against Amazon in pursuance of the complaint by Future Coupons Pvt Ltd”. There seemed to be a one-sided hostility towards Amazon from independent directors who were supposed to be unbiased. They have an obligation towards the protection of the ordinary shareholder of the company, lenders and bankers, employees and small stakeholders. We need to stop giving long ropes to the board and directors and put in a mechanism where we can fix accountability and bring more transparency in corporate governance. Else, we will lose investor trust in the long-run.