COMPANY LAW

PRACTICE OF GOOD CORPORATE GOVERNANCE Vs. FRAUD

SUBMITTED BY:
SURIANARYANAN.R (17040142025) BBA LL.B (Hons.) [2017-22]
DHINESH.V (17040142007) BBA LL.B (Hons.) [2017-22]

SUBMITTED TO: Prof. Dr.RASHMI K S

ALLIANCE SCHOOL OF LAW

DATE OF SUBMISSION: 25/09/2019

 TABLE OF CONTENTS
1. ABSTRACT………………………………………………………………………….....1
2. SYNOPSIS……………………………………………………………………………...2
 Research Background .………………………………………………………………2
 Objectives of The Study ..…………………………………………………………....2
 Scope Of The Study ...……………………………………………………………….2
 Hypothesis..…………………………………………………………………………..3
 Literature Review………………………………………………………………….....3
 Research Question……………………………………………………….…….……..4
3. CORPORATE GOVERNENCE …………………………………..…………………5
 Introduction…………………………………………………………………………..5
 Functions……………………………………………………………………………..5
 The Benefits of Shareholders………………………………………………………...6
 The Benefits of National Economy…………………………………………………..6
 Five Golden Rules of Corporate Governance………………………………………..7
 Components of Corporate Governance………………………………………………8
 Legal Framework……………………………………………………………………10
 Key Legal Framework for Corporate Governance In India…………………………11
 Inference on Research Question…………………………………………………….12
4. CASE LAW……………………………………………………………………………15
 Kingfisher airlines case……………………………………………………………...15
 Sahara case…………………………………………………………………………..15
5. CONCLUSION………………………………………………………………………..16
6. BIBLIOGRAPGY…………………………………………………………..................16
ABSTRACT:
Corporate governance is just how an organization is regulated or controlled. Corporate
governance mulls over organization partners as legislative members, the central members being
investors, organization the board, and the directorate. Adjunct members may incorporate workers
and providers, accomplices, clients, legislative and proficient association controllers, and the
network where the enterprise has a nearness. Since there are such a large number of invested
individuals, it's wasteful to enable them to control the organization straightforwardly. Rather, the
partnership works under an arrangement of guidelines that enable partners to have a voice in the
company equivalent with their stake, yet enable the organization to keep working in an effective
way. Corporate governance additionally considers review methodology so as to screen results
and how intently they stick to objectives and to persuade the association in general to progress in
the direction of corporate objectives. By utilizing corporate governance systems admirably and
sharing outcomes, a partnership can inspire all partners to move in the direction of the company's
objectives by exhibiting the advantages, to partners, of the enterprise's prosperity. Basically,
however, corporate governance alludes to the structure all things considered and connections by
which an organization must stand, including inside procedures just as legislative guidelines and
the requests of partners. It additionally considers frameworks and procedures, which manages the
everyday working of the business, detailing necessities, review data, and long haul objective
plans. Corporate governance gives a guide to a partnership, helping the pioneers of an
organization settle on choices dependent on the standard of law, advantages to partners, and
reasonable procedures. It enables an organization to set sensible objectives and philosophies for
achieving those objectives.

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RESEARCH BACKGROUND:
During the 1800s, state enterprise laws aided the making of corporate sheets, who could
administer, much like state congresses, without the consistent assent of investors. This made the
running of enterprises significantly more effective. Over the long haul, corporate sheets appear to
accumulate increasingly more power, especially with the beginning of enormous common assets
and comparative money building substances, which spot another layer of association among
partners and corporate governors. Luckily, the vast majority straightforwardly associated with
corporate governance are straightforward and keen on what's best for the organization, however
there have been glaring and damaging special cases to that recently. Gatherings included
legitimately in corporate governance don't simply incorporate the Board of Directors, yet
additionally the SEC, the organization's CEO, the executives, and the more significant investors.
Investors commonly delegate their basic leadership rights to administrators to act to their greatest
advantage. Corporate governance depends to a great extent on trust – the trust, by the partners,
that incomes will be genuinely shared, and that those legitimately associated with running the
organization are running it in a straightforward, fair, and open way, and that they speak to the
eventual benefits of the organization and of the investors. In this manner, key components of
corporate governance are trustworthiness, trust and uprightness, receptiveness, obligation, and
responsibility. Later new legislative guideline has endeavored to strengthen these components.
This made the reason for the evolution of corporate governance.
OBJECTIVES:

 Adequate disclosures and effective decision making to achieve corporate objectives;

 Transparency in business transactions;
 Statutory and legal compliances;
 Protection of shareholder interests;
 Commitment to values and ethical conduct of business.

SCOPE:

 Good corporate governance guarantees corporate achievement and financial

development.
 Solid corporate governance keeps up speculators' certainty, because of which,
organization can raise capital productively and successfully.
 It brings down the capital expense.
 There is a positive effect on the offer cost.
 It gives legitimate instigation to the proprietors just as directors to accomplish goals that
are in interests of the investors and the association.
 Great corporate governance likewise limits wastages, corruption, dangers and botch.
 It helps in brand arrangement and improvement.

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  It guarantees association in oversaw in a way that fits the eventual benefits of all.

HYPOTHESIS:
Utilizing good corporate governance helps the company to regulate risk and reduce the
opportunity for corruption. Regular scandals and fraud within a company become more likely
where directors and senior management do not have to comply with a formal governance code.

LITERATURE REVIEW:
Accounting fraud by Marco Tutino and Matteo merlo:
Corporate governance and accounting fraud corporate governance is a set of rules, regulations
and policies that companies have to comply with in order to avoid fraud and misconduct. States
themselves try to establish some controls through a regulatory system. These measures which
companies decide to adopt concern, mostly1, the organization and the board of directors.
Literature has recently focused on the role that CEOs and managers have in accounting fraud.
Troy, Smith and Domino (2011) with their article have analyzed how some CEOs could be more
inclined to commit fraud than others. In particular, they identified that a specific type of
managing director, sharing the same characteristics (young, less functionally experienced and
without a business degree), are more likely to rationalize an accounting fraud. Moreover, CEO
stock options, a tool commonly used to control managers attitude bonding company’s stock
prices and some benefits, do not moderate the relationship between CEO experience and the
probability of accounting fraud. The results suggest that there is a direct relationship between
stock options and accounting fraud. 
2011 International Conference on E-business, Management and Economics:
Corporate governance importance arises in modern corporations due to the separation of
management and ownership control in the organizations 2. The interests of shareholders are
conflicting with the interests of managers. The principal agent problem is reflected in the
management and direction related problems due to the differential interests of firm’s
stakeholders. There is not a single definition of corporate governance rather it might be viewed
from different angles. Berle and Means (1932) and the even earlier Smith (1776). Zingales
(1998) defines corporate governance as “allocation of ownership, capital structure, managerial
incentive schemes, takeovers, board of directors, pressure from institutional investors, product
1
Tutino, M., & Merlo, M. (2019). Accounting fraud: A literature review. Risk Governance and Control: Financial Markets &
Institutions, 9(1), 8-25. http://doi.org/10.22495/rgcv9i1p1
2
2011 International Conference on E-business, Business and Management-ICEBM2011(ISBN: 978-981-08-8641-7)

November 25-26, 2011 | Maldives

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market competition, labor market competition, organizational structure, etc., can all be thought
of as institutions that affect the process through which quasi-rents are distributed (p. 4)”. Garvey
and Swan (1994) assert that “governance determines how the firm’s top decision makers
(executives) actually administer such contracts (p. 139)”. Shleifer and Vishny (1997) define
corporate governance as “the ways in which suppliers of finance to corporations assure
themselves of getting a return on their investment (p.737)”. OECD in 1999 defined corporate
governance as "Corporate governance is the system by which business corporations are directed
and controlled. The corporate governance structure specifies the distribution of rights and
responsibilities among different participants in the corporation, such as, the board, managers,
shareholders and other stakeholders, and spells out the rules and procedures for making decisions
on corporate affairs. By doing this, it also provides the structure through which the company
objectives are set, and the means of attaining those objectives and monitoring performance.”
Oman (2001) defined corporate governance as a term refers to the private and public institutions
that include laws, regulations and the business practices which governs the relationship between
the corporate managers and the stakeholders.The Ministry of Finance, Singapore (CORPORATE
GOVERNANCEC 2001) defines corporate governance as “the processes and structure by which
the business and affairs of the company are directed and managed, in order to enhance long term
shareholder value through enhancing corporate performance and accountability, whilst taking
into account the interests of other stakeholders. Good corporate governance therefore embodies
both enterprise (performance) and accountability (conformance).” (Fin, 2004, pp 13-14). La
Porta, Silanes and Shliefer (2000, 2002) view corporate governance as a set of mechanisms
through which outside investors (shareholders) protect themselves from inside investors
(managers). The Organization for Economic Cooperation and Development provides another
perspective by stating that “corporate governance is the system by which business corporations
are directed and controlled. The corporate governance structure specifies the distribution of
rights and responsibilities among different participants in the corporation, such as the Board,
managers, shareholders and other stakeholders, and spells out the rules and procedure for making
decisions on corporate affairs. By doing this, it also provides the structures through which the
company objectives are set, and the means of attaining those objectives and monitoring
performance.  
CORPORATE GOVERNANCE: A LITERATURE REVIEW WITH A FOCUS ON
PUBLIC SECTOR UNDERTAKINGS IN INDIA
Corporate Governance is steadily focusing on building the confidence of its various stake holders
including Customers, Suppliers, employees, shareholders, Bankers and Society at large. As these
public-sector organization (PSU)3 are socially responsible unit, it becomes utmost important for
these organization to adhere to these clauses because these are run by tax payer money for its
operation. A company is directed and controlled with the system of rules, practices and process
of the corporate governance. The corporate Governance framework of any Public-Sector
Undertakings depends upon the four pillars namely Transparency, Full disclosures, Independent
3
PSUs fare poorly in corporate governance: Study. (Corporate Trends)", The Economic Times, Nov 24 2015 Issue.

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monitoring and Fairness to all. Study examines the existing corporate Governance environment,
practice and institutional framework in PSUs in India. It is a theoretic review of corporate
governance of PSU in India. This paper attempts to understand the various reason for failure to
hold governance of the PSUs in India and accordingly provide the solutions to improve the
implementation of corporate governance. 

RESEARCH QUESTION:
The tie between corporate governance and fraud/corruption preventions.
What changed in the legal landscape post Satyam scam in India?

INTRODUCTION:
Corporate governance is the mix of standards, procedures or laws by which organizations are
worked, directed or controlled. The term envelops the inner and outer elements that influence the
interests of an organization's partners, including investors, clients, providers, government
controllers the board. The top managerial staff is in charge of making the structure for corporate
governance that best adjusts business direct with goals.
Corporate governance has additionally been characterized as "an arrangement of law and sound
methodologies by which partnerships are coordinated and controlled concentrating on the inner
and outer corporate structures with the expectation of observing the activities of the board and
executives and in this way moderating office dangers which may come from the offenses of
corporate officials."
Explicit procedures that can be sketched out in corporate governance incorporate activity plans,
execution estimation, revelation rehearses, official remuneration choices, profit strategies,
techniques for accommodating irreconcilable circumstances and unequivocal or certain
agreements between the organization and partners.
A case of good corporate governance is a well-characterized and upheld structure that works to
help everybody worried by guaranteeing that the venture sticks to acknowledged moral
principles, best rehearses formal laws. On the other hand, terrible corporate governance is
viewed as ineffectively organized, equivocal and resistant, which could harm the picture or
money related wellbeing of a business.
FUNCTIONS:
Oversight work the governing body ought to give vital guidance to the board and direct
administrative execution, yet maintain a strategic distance from micromanaging. Managerial

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work the viability of this capacity relies upon the arrangement of the executives' advantages with
those of shareholders. Compliance work These to blemishes, guidelines, principles, models, and
best practices created by state and government lawmakers, controllers, standard-setting bodies,
and expert associations to make a consistence system for open organizations in which to work
and accomplish their objectives.
Inside review work Assurance and counseling administrations to the organization in the zones of
operational effectiveness, chance administration, inner controls, monetary revealing, and
governance forms.
Lawful and money related warning capacities Legal exhortation and helps the organization, its
executives, officials, and representatives in consenting to relevant laws and other lawful
commitments and guardian obligations.
Outer review work External evaluators loan validity to the organization's money related reports
and therefore increase the value of its corporate governance through their incorporated review of
both inside power over budgetary detailing and fiscal summaries. Observing capacity
Shareholders, especially institutional investors, engaged to choose and, whenever justified,
evacuate executives.
THE BENEFITS OF SHARE HOLDERS:
√ Good CORPORATE GOVERNANCE can give the best possible motivations to the board and
the executives to seek after targets that are in light of a legitimate concern for the organization
and shareholders, just as encourage viable checking.
√ Better CORPORATE GOVERNANCE can likewise furnish Shareholders with more
noteworthy security on their speculation.
√ Better CORPORATE GOVERNANCE likewise guarantees that shareholders are adequately
educated on choices concerning principal issues like changes of rules or articles of fuse,
clearance of benefits, and so forth.
THE BENEFITS OF NATIONAL ECONOMY:
√ Empirical proof and research led lately bolsters the suggestion that it pays to have good
CORPORATE GOVERNANCE. It was discovered that over 84% of the worldwide institutional
speculators are eager to pay a premium for the portions of a well-administered organization more
than one thought about ineffectively represented yet with a similar money related record.
√ The reception of CORPORATE GOVERNANCE standards – as good CORPORATE
GOVERNANCE practice has just appeared in different markets – can likewise assume a job in
expanding the corporate estimation of organizations.
Defenders of corporate governance state there's an immediate connection between good
corporate governance rehearses and long haul investor esteem. A portion of the key benefits are:

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  Elite Boards of Directors;
 Responsible administration and solid inner controls;
 Expanded investor commitment;
 Better oversaw hazard; and
 Adequately observed and estimated execution.

FIVE GOLDEN RULES OF CORPORATE GOVERNANCE:

As we have iterated, this piece of the report clarifies our perspective on best corporate
governance practice and the all-encompassing methodology by which we accept an association
can guarantee that a condition of good corporate governance exists, or is brought into being if its
reality is dubious. It takes the view that there is a superseding good measurement for maintaining
a business and that the standard of governance will rely upon the ethical composition of the
activity.
The business' profound quality or ethic must saturate the whole activity start to finish and grasp
all partners best corporate governance practice is an essential piece of good management practice
likewise pervading the whole activity, and not an obscure specialism tended to by legal advisors,
examiners and sociologists4
The standards of this methodology are hence encircled in connection to the ordinary method for
taking a gander at how a business ought to be appropriately run.
Our Five Golden Rules of best corporate governance practice is:
1. Ethics: obviously moral practices applied to the business
2. Align Business Goals: fitting goals, touched base at through the production of a reasonable
partner interest in basic leadership model
3. Strategic management: a compelling methodology process which incorporates partner esteem

4
http://tamsltd.net/about-us/corporate-governance

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4. Association: an association reasonably organized to offer impact to the good corporate
governance
5. Reporting: reporting frameworks organized to give straightforwardness and responsibility.
This methodology perceives that the interests of various partners convey diverse weight, yet it
doesn't, using any and all means, recommend that those with a lion's share intrigue matters and
the rest don't. Actually, best corporate governance practice manages that all partners ought to be
treated with equivalent concern and regard.
For clear reasons, in spite of the fact that the philosophy we will propose includes bringing
significant partners into more prominent record when detailing methodology, it is intended to
produce all adjust support as a result of the way that each partner, regardless of how little, is
allowed the chance to express a view, through the nonstop observing of partner discernments.
The administrative way to deal with the subject would view governance as something all alone,
to do with guaranteeing a harmony between the different invested individuals in an
organization's undertakings, or all the more especially a method for ensuring that the
administrator or CEO is leveled out, delivering straightforwardness in reporting or controlling
over-liberal compensation bundles and so forth.

The pith of achievement in business is:

 having a reasonable and reachable objective

 having a possible procedure to accomplish it
 making an association proper to convey
 Having set up a reporting framework to guide progress.

Best corporate governance practice is tied in with accomplishing the partners' objective, and
conveying achievement in a moral manner. Henceforth it pursues that it must involve a
comprehensive utilization of good management.

COMPONENTS OF CORPORATE GOVERNANCE:

TRANSPARENCY
Transparency is never again only an alternative, however almost a lawful necessity that an
organization needs to consent to. For an organization, this implies it permits its procedures and

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exchanges detectable to outcasts. It additionally makes essential revelations, advises everybody
influenced about its choices, and conforms to lawful prerequisites. 5
WHY TRANSPARENCY?
a) Besides halting the following illicit moneymaking plan, transparency likewise assembles
a good notoriety of the organization being referred to. At the point when shareholders
feel they can confide in an organization, they are eager to contribute more, and this
extraordinarily helps in bringing down expense of capital.
b) Transparency is a basic part of corporate governance since it guarantees that the majority
of an organization's activities can be checked at some random time by an outside
spectator. This makes its procedures and exchanges unquestionable, so if an inquiry
comes up about a stage, the organization can give a reasonable answer.
c) Guarantee convenient, precise exposure on every single material issue, including the
money related circumstance, execution, possession and corporate governance.

ACCOUNTABILITY
It takes more than transparency to assemble respectability as an organization. It likewise takes
accountability, which can likewise mean answerability or risk.
WHY ACCOUNTABILITY?
a) Shareholders are profoundly inspired by who will assume the accusation when something
turns out badly in one of an organization's numerous procedures 6. Also, notwithstanding
when everything goes easily true to form, realizing that somebody will be considered
responsible for future disasters expands shareholders' certainty, which thus builds their
longing to contribute more.
b) Accountability is more than that. It's tied in with having responsibility for activities
whether the results of those activities are good or awful. In this way, accountability
covers failings, yet additionally achievements.
c) At the point when the possibility of accountability is drawn closer with this inspirational
viewpoint, individuals will be increasingly open to it as a way to improve their
presentation. This applies from the staff as far as possible up to the corporate board.

SECURITY

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Corporate fraud and corruption: A holistic approach to preventing financial crises
6
M Fenwick, EPM Vermeulen - European Business Organization Law 2015- Springer

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An organization is required to make their procedures straightforward and their kin responsible
while keeping their endeavor information secure from unapproved get to 7. There is just no
tradeoff for this. Organizations that experience security breaks including the presentation of their
customers' close to home data rapidly lose their believability.
WHY SECURITY?
a) Indeed, even with accountability and transparency, an organization without deficient
security estimates will experience considerable difficulties drawing in shareholders. All
things considered, any embarrassment — even a rupture brought about by outsider
programmers — can negatively affect an organization's financial exchange execution.
b) The expanding risk of digital wrongdoing as of late puts security at a high need for some
organizations. Consenting to security gauges isn't sufficient — an organization needs to
soak up a culture of security to guarantee that competitive advantages, corporate
information, and customer data are altogether remained careful from unapproved access
from all around. Security isn't only an IT concern any longer, not at all like previously.
c) Chiefs ought to be made mindful of the earnestness of digital wrongdoing and the gravity
of its outcomes. A security rupture — particularly including customer data — can make
the open effectively lose their trust. Trust is a major factor which will be considered by
shareholders before making an interest in an organization.

LEGAL FRAMEWORK:
The Indian statutory structure has, by and enormous, been in consonance with the international
accepted procedures of corporate governance. Extensively, the corporate governance instrument
for companies in India is identified in the accompanying enactments/guidelines/rules/listing
agreement:

 The Companies Act, 2013 bury alia contains arrangements identifying with board
constitution, board gatherings, board forms, autonomous chiefs, general gatherings,
review councils, related gathering transactions, revelation necessities in budget reports8,
and so on.
 Securities and Exchange Board of India (SEBI) Guidelines: SEBI is an administrative
authority having locale over recorded companies and which issues guidelines, standards
and rules to companies to guarantee assurance of speculators.
 Standard Listing Agreement of Stock Exchanges: For companies whose offers are
recorded on the stock exchanges.

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EPM Vermeulen - Wake Forest L. Rev., 2015 - HeinOnline
8
The Companies Act, 2013 passed by the Parliament has received the assent of the President of India on 29th August, 2013.

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  Accounting Standards issued by the Institute of Chartered Accountants of India (ICAI):
ICAI is a self-governing body, which issues accounting standards giving rules to
revelations of money related data. Area 129 of the New Companies Act entomb alia gives
that the fiscal reports will give a genuine and reasonable perspective on the situation of
the company or companies, follow the accounting standards advised under s 133 of the
New Companies Act. It is further given that things contained in such budget summaries
will be as per the accounting standards.
 Secretarial Standards issued by the Institute of Company Secretaries of India (ICSI): ICSI
is a self-governing body, which issues secretarial standards as far as the arrangements of
the New Companies Act. Up until now, the ICSI has issued Secretarial Standard on
"Gatherings of the Board of Directors" (SS-1) and Secretarial Standards on "General
Meetings" (SS-2). These Secretarial Standards have come into power w.e.f. July 1, 2015.
Segment 118(10) of the New Companies Act give that each company (other than one
individual company) will watch Secretarial Standards indicated all things considered by
the ICSI as for general and board gatherings.

KEY LEGAL FRAMEWORK FOR CORPORATE GOVERNANCE IN INDIA:

The Companies Act, 2013
The Government of India has recently notified Companies Act, 2013 ("New Companies Act"),
which replaces the erstwhile Companies Act, 1956. The New Act has greater emphasis on
corporate governance through the board and board processes. The New Act covers corporate
governance through its following provisions:
New Companies Act introduces significant changes to the composition of the boards of directors.
Every company is required to appoint 1 (one) resident director on its board.
Nominee directors shall no longer be treated as independent directors.
Listed companies and specified classes of public companies are required to appoint independent
directors and women directors on their boards.

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New Companies Act for the first time codifies the duties of directors.9
Listed companies and certain other public companies shall be required to appoint at least 1 (one)
woman director on its board.
New Companies Act mandates following committees to be constituted by the board for
prescribed class of companies:

 Audit committee
 Nomination and remuneration committee
 Stakeholder’s relationship committee
 Corporate social responsibility committee
 Listing agreement – Applicable to the listed companies

SEBI has amended the Listing Agreement with effect from October 1, 2014 to align it with New
Companies Act.
Clause 49 of the Listing Agreement can be said to be a bold initiative towards strengthening
corporate governance amongst the listed companies. This Clause intends to put a check over the
activities of companies in order to save the interest of the shareholders. Broadly, cl 49 provides
for the following:
1. Board of Directors
The Board of Directors shall comprise of such number of minimum independent directors, as
prescribed. In case where the Chairman of the Board is a non-executive director, at least one-
third of the Board shall comprise of independent directors and where the Chairman of the Board
is an executive director, at least half of the Board shall comprise of independent directors. A
relative of a promoter or an executive director shall not be regarded as an independent director.
2. Audit Committee
The Audit Committee to be set up shall comprise of minimum three directors as members, two-
thirds of which shall be independent.
3. Disclosure Requirements
Periodical disclosures relating to the financial and commercial transactions, remuneration of
directors, etc., to ensure transparency.
4. CEO/ CFO Certification

9
**Provisions of Part IX A of the Companies Act, 1956 shall be applicable mutatis mutandis to a Producer Company in a
manner as if the Companies Act, 1956 has not been repealed. (Ref. section 465 of Companies Act, 2013)

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To certify to the Board that they have reviewed the financial statements and the same are fair and
in compliance with the laws/ regulations and accept responsibility for internal control systems.
5. Report and Compliance
A separate section in the annual report on compliance with Corporate Governance, quarterly
compliance report to stock exchange signed by the compliance officer or CEO, company to
disclose compliance with non-mandatory requirements in annual reports. The compliance
requirements prescribed under cl 49 of the Listing Agreement have been elaborated in Annexure
attaches to this chapter.

RESEARCH QUESTION:
1) THE TIE BETWEEN CORPORATE GOVERNANCE AND
FRAUD/CORRUPTION PREVENTION:

An organization's top managerial staff faces hazards all over. Fraud, catastrophic event, digital
dangers, corporate outrages, production network breakdowns - the rundown goes on. Chiefs
attempt their best to forestall fraud and other such chances, yet how they react to an emergency
can represent the moment of truth their organization's notoriety. In criminal law, fraud is
deliberate misdirection made for individual addition or to harm another individual; Fraud is a
wrongdoing and a common law infringement, however the particular criminal law definition
changes by legitimate purview. Defrauding individuals or elements of cash or assets is a typical
motivation behind fraud. Corruption has various implications in various social orders. It is hard
to set up a reasonable outskirt among legitimate and unlawful, among legitimacy and pay off.
(Rose-Ackerman, 2005)Various ways to deal with corruption can be put into five gatherings.
These are open premium focused, advertise focus
ed, open office-focused, general conclusion focused and legalistic. Advocates of the public,
interest-focused methodology accept that corruption is somehow or another harmful to or
damaging of open intrigue. (Rogow and Laswell, 1970). Market-focused lovers propose that
standards administering open office have moved from a required estimating model to a free-
advertise model, along these lines significantly changing the idea of corruption. (Tilman,1970).
Open office-focused heroes stress the way that abuse by officeholders of open office for private
addition is corruption. (Theobald, 1990). The individuals who have faith in popular assessment
focused meanings of corruption stress the viewpoints of general supposition about the direct of
legislators, government and integrity of community workers. (Leys, 1970) Others have proposed
taking a gander at corruption absolutely as far as legitimate criteria in perspective on the issues
inalienable in deciding guidelines and standards which administer open intrigue, conduct and
authority. (Scott, 1972).Differences of supposition still exist with regards to the importance of
the term corruption. This is principally in light of the fact that people take a gander at corruption
from their very own vantage focuses impacted by encompassing condition. In any case, is

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gladdening that as of late corruption is seen from an a lot more extensive point of view instead of
taking a gander at it from good and utilitarian edges in particular. Be that as it may, the more
extensive meaning of corruption alludes to "utilization of one's legitimate situation for individual
and gathering gain.
2) What changed in the legal landscape post Satyam scam in India?

The Satyam Scam in 2009, sent stun waves through India Inc. and afterward adjusted the
corporate governance landscape in India for all time. On January 7, 2009, the Chairman of
Satyam Software Services Ltd, Ramalinga Raju, admitted to a Rs 7,136 crore fraud submitted by
him and a couple of others at the company. The trick featured a few escape clauses in the Indian
corporate governance structure - dishonest lead, fraudulent accounting, insider exchanging,
oversight by evaluators, and inadequacy of Board, disappointment of autonomous executives and
non-exposure of material facts to the partners. 10
On April 9, 2015 the Special Court at Hyderabad saw all the ten blamed as blameworthy for
swindling, criminal connivance, criminal rupture of trust, falsification, and hindrance of proof. B
Ramalinga Raju and his brother Rama Raju were condemned to seven years' prison and fined ₹5
crore each. The sentenced people have claimed against the choice. The intrigue is pending in the
Sessions Court in Hyderabad, and are on bail. In the middle of, be that as it may, a large group of
measures have been taken by the legislature and controllers as for corporate governance in India.

The Committees:
In 2009, the Confederation of Indian Industries set up a team headed by previous bureau
secretary Naresh Chandra to recommend changes. In light of the proposals of this team, the
Ministry of Corporate undertakings issued Voluntary Guidelines for Corporate Governance in
2009. The National Association of Software and Services Companies additionally settled a
corporate governance and ethics board. This Committee proposed changes identifying with
review advisory groups, investor rights, and informant approach.
The Securities and Exchange Board of India (SEBI)
In April 2014, SEBI altered the Listing Agreement to incorporate arrangements identifying with
foundation of a vigil component, job of Audit Committee in instances of suspected fraud or
inconsistency, and the job of the Chief Executive Officer and the Chief Financial Officer relating
to money related reporting and revelation to the Audit Committee. In 2015, SEBI encircled the
SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("LODR"), relevant
to every single recorded company, and accommodated stringent rules identifying with
reporting/divulgence of material occasions and actual and suspected fraud.
Companies Act, 2013:
10
Bombay Stock Exchange; Security and Ex-change Board of India, available at www.sebi.gov.in)

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The Companies Act 1956 came to be canceled with the new Companies Act 2013 (Act). The
new Act has made an obvious takeoff from the old Act and has acquired a few estimates planned
to profit the bigger partner network, with the subsequent increment in consistence costs for the
company. The Act accommodates corporate fraud as a criminal offense. It sets out clear
commitments for reporting of occurrences of fraud on examiners, cost accountants and company
secretaries. It unmistakably diagrams the duty and responsibility of reviewers and autonomous
chiefs, who are relied upon to assume a progressively active job. The balanced governance
acquainted with guarantee legitimate governance and management in the company require the
hitherto latent actors to assume a crucial job, in light of a legitimate concern for the shareholders,
creditors, vendors, clients and other partners in the company.
To recognize and report cases of fraud and other anomalies, the Act accommodates every single
recorded company to have a vigil system, and mandates a Directors' Responsibility Statement to
be a piece of the Report of Board of Directors. It accommodates obligatory pivot of individual
evaluators following five years and review firms following ten years to discount malpractices
and budgetary oversight and guarantee freedom of inspectors. The inspectors are likewise
committed presently to report examples of fraud seen by them during the presentation of their
obligations. The Institute of Chartered Accountants of India (ICAI) turned out with a Guidance
Note on Reporting on Fraud (ICAI Guidance Note, 2016). The Act likewise advances a stringent
system for related gathering transactions.

Serious Fraud Investigation Office (SFIO):

The SFIO under the new Act has a statutory status and has as of late likewise been presented the
ability to capture. The SFIO has been actively exploring cases identifying with corporate fraud.
End:
In the years since the Satyam trick broke out, considerable changes have been made as for
corporate governance in India. The utilization of criminal endorses by the Parliament to manage
corporate lead has been on the ascent. The controllers and the analytical bodies are progressively
careful. The expanded consistence expenses of companies just serves well to ensure the interests
of the considerable number of partners in the company.

CASE LAW:
KINGFISHER AIRLINES LOSES LICENSE TO FLY
Facts:

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The monetarily agitated Kingfisher Airlines lost its flying grant after a cutoff time to recharge its
suspended permit terminated. The Directorate General of Civil Aviation (DGCA) has suspended
Kingfisher Airlines permit to fly till further arranges compliant with Clause 15 (2) of Schedule
XI of the Aircraft Rules, 1937, after the carrier neglected to convey a suitable money related and
authoritative recovery plan.11
The obligation ridden bearer was grounded since October 2012 after rehashed strikes by laborers
over unpaid wages. Kingfisher owes different open area banks $1.4bn (£870m) in obligations
and has been attempting to raise assets after moneylenders would not give new credits.
Judgment:
The carrier presently owes cash to staff, air terminals, charge specialists and its loan specialists
and may must be exchanged.
CASE LAW:
SAHARA TOLD TO REPAY $3 BILLION TO SMALL INVESTORS.
Facts:
Unlisted aggregate Sahara, one of India's greatest business gatherings was requested by the
Supreme Court of India after a drawn out fight in court with capital markets controller SEBI to
discount 174 billion rupees raised by "questionable" signifies from 22 million little speculators.
From 2008-11, they got 174 billion rupees through what is known as an alternatively completely
convertible debentures. The Sahara was likewise approached to pay 15 percent enthusiasm to the
financial specialists of the reserve which has been wrongfully raised from the general population
without turning to appropriate lawful system.

Judgment:
The Supreme Court, whose request reaffirmed a prior decision that the gathering pledges didn't
meet the guidelines, requested two unlisted Sahara gathering firms to discount cash they had
raised with the enthusiasm inside a quarter of a year. The judgment shut a much abused proviso
of the corporate raising support laws in India and underscored an expanding emphaticness by
India's legal executive and controllers as businesses and budgetary markets extend at a quick
pace in Asia's third-biggest economy.

CONCLUSION:

11
ACFE, “Report to the Nation on Occupational Fraud and Abuse,” The Association of Certified Fraud Examiners, 2010.
www.acfe.com

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Successful corporate governance can be accomplished by embracing a lot of rules that relies on,
trustworthiness, liberality, equity and the way in which organizations direct their undertakings.
The righteousness morals of liberality, equity and genuineness are immensely significant in the
present business because of the difficulties associations face with developing globalization.
Mattel, Inc's GMP was a support in the region of corporate duty. Its inability to proceed with that
model was because of different inward and outer powers, which may have been alleviated if
progressively prudent moral standards were applied in arranging their arrangements and
methods.
BIBLIOGRAPHY:

 ACCOUNTING FRAUD BY MARCO TUTINO AND MATTEO MERLO.

 CORPORATE GOVERNANCE: A LITERATURE REVIEW WITH A FOCUS ON

PUBLIC SECTOR UNDERTAKINGS IN INDIA.
 https://www.lawteaacher.com
 https://www.mondaq.com
 https://www.taxguru.com

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