Book Title: Research Handbook on Shareholder Inspection Rights: A Comparative Perspective

Publisher: Edward Elgar Publishing

Abstract: This chapter finds that, in the context of India, the shareholder inspection regime is both wide and narrow. It is wide because there are no threshold requirements for seeking inspection, such as a minimum shareholding or the existence of “proper purpose”. However, the scope of inspection is rather circumscribed because shareholders have access only to limited prescribed documents (such as registers of members, of charges, and the like). Other key documents like books of accounts, board papers and minutes are available for inspection only by directors to enable them to discharge their duties, and they are not accessible by shareholders. The chapter finds that, unlike jurisdictions such as Delaware and Australia, Indian corporate law suffers from fragmentation. The shareholder inspection provisions are scattered all over the Companies Act, 2013, as the legislation contains different lists of documents accessible by different sets of stakeholders (such as shareholders, debenture-holders and directors). Such fragmentation, consequently, translates into judicial pronouncements as well and does not facilitate empirical analysis. The chapter also finds that, given the concentration of shareholdings in Indian companies, shareholder inspection is more closely connected with oppression (and unfair prejudice) actions, and not with derivative actions and class actions which are generally associated with companies carrying dispersed shareholdings. To that extent, in certain instances, Indian courts invoked their inherent powers to expand the scope of shareholder inspection rights as a tool to enable the resolution of corporate disputes involving oppression. Due to the limited scope and prescriptive nature of documents accessible through exercise of inspection rights, and the diffusion of legal provisions and respective remedies, the analysis reveals that the Indian shareholder inspection regime is restrictive and suffers from rigidity, thereby raising doubts as to its efficacy as a minority protection tool. The chapter concludes with some suggestions for legislative reforms to expand the scope of shareholder inspection in India together with the introduction of measures to guard against the misuse of these rights by recalcitrant shareholders.