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CAN ARTIFICIAL INTELLIGENCE MANAGE THE AFFAIRS OF A COMPANY: A CONTEMPORARY ANALYSIS WITH COMPANIES ACT, 2013. BY: POLAVARAPU SAI CHARAN
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CAN ARTIFICIAL INTELLIGENCE MANAGE
THE AFFAIRS OF A COMPANY: A CONTEMPORARY ANALYSIS WITH COMPANIES ACT, 2013.
AUTHORED BY:
POLAVARAPU SAI CHARAN
DESIGNATION:
4 TH YEAR B.B.A. LL. B(HONS.) STUDENT
UNIVERSITY:
Xavier Law School, Xim University, Bhubaneshwar
Origin & Evolution of AI
Back in the 1950s the outdated
technology, as we know today used to be a thing only the rich and intellectual
few could afford. Among the ones who could afford, only a further few pursued
it and contributed towards research and development of technology. Acclaimed
mathematician & computer scientist Alan Turing in his paper “Computer
Machinery & Intelligence” first introduced the idea of having a super
computer, designed in a way in which it could not only mimic human like mind
mapping but could potentially solve complex problems and assist in the
betterment of human livelihood. [1] Few years later in a conference “Darthmouth
Summer Research Project on Artificial Intelligence” theorists Allen Newell,
Cliff Shaw & Herbert Simon presented a model called “Logic Theorist”. This
model was a computer program which was designed to mimic human skills required
for problem solving and to come up with alternative solutions to day to day
human activities. These ideas worked like a catalyst in the late 1990s
through late 2010s, resulting in the a potential new form of life, among us,
one which can think like a human, work like a human, plan like a human yet what
really challenges is the form in which it exists is nothing like the
traditional one rather exists as a computer programs in devices, the Artificial
Intelligence.
But the question is Can Artificial
Intelligence be entrusted with the same responsibilities as a Human Being? Artificial
Intelligence for sure has the potential to bring out major reforms to multiple
specters of human life and has the required application solve and multitask
through complex situations and all this at a fraction of time in comparison to
what an ordinary person would have taken. In the personal ambit Artificial
Intelligence has found its way into the human life through multifold approach,
be it as an voice assistant, be it as smart home utility gadget, be it
professional designing tools, be it the prototype in vehicles and
communications. From aiding to work place corporate pitches to civil
engineering, from defence mobility to medical research and developments, from
education to recreational entertainment and leisure. But the question is can Artificial
Intelligence be allowed to use its application to govern itself and thus take
critical decisions, operate an organization or apply its commercial wisdom to a
corporate entity and balance good governance or should it be regulatorily restricted
as only a aiding tool and nothing beyond?
Can Artificial Intelligence be
appointed as Key Managerial Persons in companies, can Artificial Intelligence
be brought on as a Board Director to optimize the companies’ affairs?
Who are KMP, BOD, MP & Managers
The Companies Act of 2013[2] in India represents a pivotal
legislative overhaul aimed at reinforcing corporate governance, secretarial
standards and enhancing transparency in corporate entities to help them achieve
their economic objectives while protecting the humane element of the ecosystem.
Within this statutory framework, Key Management Personnel (KMP), Board of
Directors (BoD), and Managers play indispensable roles in steering the affairs
of a company. This essay delves into the regulatory provisions governing these
entities and their respective responsibilities under the Companies Act 2013.
·
Key
Management Personnel (KMP):
Under Section 2(51) of
the Companies Act 2013[3], KMP encompasses individuals who
wield substantial authority and bear significant responsibilities in the senior/top
management hierarchy. The Act explicitly identifies KMP to include the Managing
Director, Chief Executive Officer, Chief Financial Officer, Company Secretary,
and Whole-time Director. Additionally, any other officer as specified by the
Board also falls under the purview of KMP.
Section 197 & Section
203 are notable provision concerning KMP, whit regardsto the disclosure of related information. This
ensures transparency regarding the compensation packages of key executives,
thereby aligning their interests with those of shareholders. Moreover, Section
203 imposes stringent disclosure requirements on KMP regarding their
shareholding in the company, mitigating potential conflicts of interest and
promoting corporate governance best practices.
·
Board
of Directors (BoD):
The Board of Director[4] serves as the apex governing body
entrusted with the responsibility of charting the company's strategic course
and ensuring its overall governance. As per Section 149 of the Companies Act
2013, the composition of the BoD must comprise executive, non-executive, and
independent directors, for companies which meet certain conditions. The
inclusion of independent directors enhances objectivity and fosters impartial
oversight, safeguarding the interests of stakeholders.
A landmark case that
underscores the significance of the Board of Director's role is the Satyam
Computers scandal. In this case, the failure of the BoD to exercise due
diligence and provide effective oversight led to one of India's most infamous
corporate frauds. Consequently, the Companies Act 2013 introduced stringent
provisions, such as mandatory rotation of auditors and enhanced disclosures, to
bolster board accountability and prevent recurrence of such malfeasance.
·
Managers:
While distinct from KMP,
managers[5] play a pivotal role in executing the
strategic directives formulated by the BoD and ensuring operational efficiency.
Their responsibilities encompass supervising day-to-day operations, managing
resources, and implementing policies in line with the company's objectives.
Although managers may not always occupy top executive positions, their
contributions are instrumental in driving organizational performance and
achieving corporate goals.
Adherence to these
statutory provisions is imperative to foster transparency, accountability, and
shareholder confidence. By upholding ethical standards and fulfilling their
obligations, these entities contribute to the sustainability and resilience of
India's corporate landscape.
What Law says on Artificial
Intelligence
Navigating the legal landscape of Artificial
Intelligence in India requires a multifaceted approach that balances innovation
with ethical and societal considerations. While existing laws provide a
foundation, specific regulations tailored to Artificial Intelligence are
imperative to address emerging challenges effectively. By proactively
addressing issues of accountability, fairness, and IP protection while
promoting ethical Artificial Intelligence development, India can harness the
transformative potential of Artificial Intelligence while safeguarding
individual rights and societal values. As India continues its journey towards
becoming a global Artificial Intelligence powerhouse, a robust legal framework
will be instrumental in guiding responsible Artificial Intelligence innovation
and ensuring equitable access to its benefits for all. In India, currently no
law or guidelines exist which governs the functioning of Artificial
Intelligence. However the Information Technology Act, 2000, serves as a
foundational statute governing electronic transactions and cyberspace.
Additionally, the Digital Personal Data Protection Act, 2023, aims to safeguard
individuals' data privacy, including data processed by Artificial Intelligence
systems. In 2018 the principle think tank of the Government of India, NITI
Aayog came with a 2 part advisory “National Strategy for Artificial Intelligence”
the 2 parts, Part-1: “Principles for Responsible AI” & Part-2: “Operationalizing
Principles for Responsible AI”
One of the foremost challenges in
regulating Artificial Intelligence pertains to accountability and liability. As
Artificial Intelligence systems autonomously make decisions, determining
responsibility in case of errors or harm becomes complex. Indian law in future
must clarify the liability framework, specifying the roles of developers,
users, and Artificial Intelligence systems themselves in various contexts, such
as autonomous vehicles, medical diagnosis, handling of data or anywhere in
general where Artificial Intelligence has applied its own mind &
application. Another critical issue is ensuring fairness and non-discrimination
in Artificial Intelligence algorithms. Biases inherent in training data can
perpetuate societal inequalities, leading to discriminatory outcomes. Indian
lawmakers need to mandate transparency and fairness assessments for Artificial
Intelligence systems, promoting inclusivity and mitigating bias in algorithmic
decision-making. Moreover, protecting intellectual property (IP) rights in Artificial
Intelligence innovations poses a significant challenge. Balancing the
incentives for innovation with the need for widespread Artificial Intelligence
access and development is essential. Indian law should provide clarity on Intellectual
Property ownership, licensing, and protection mechanisms to foster innovation
while preventing monopolistic practices that stifle competition.
Recently in 2023, India became a
signatory to the Global Partnership on Artificial Intelligence, a
intergovernmental organization comprising of more than 25 top economic
countries around the world, this partnership aims developing a responsible
Artificial Intelligence with sustainable and inclusive governance and
development.
Indian authorities are working on Artificial
Intelligence policies for the country, including the Ministry of Electronics
and Information Technology, which has created committees on Artificial
Intelligence that have submitted reports on the development, safety, and
ethical issues related to Artificial Intelligence. The Bureau of Indian
Standards, which is the national standards body of India, has also established
a committee on Artificial Intelligence that is proposing draft Indian standards
for Artificial Intelligence. While the government of India has taken steps to
regulate Artificial Intelligence, its approach has mainly been one of
pro-innovation with the development of policies and guidelines that acknowledge
the ethical concerns and risks around the use of Artificial Intelligence that shall
require the adoption of best practices. Given India’s advantage of having a
robust software development industry, this approach makes sense until the
government formally enacts Artificial Intelligence regulations.
International Analysis
Recently in March 2024, Lawmakers in
the European Parliament voted overwhelmingly in favor of the Artificial
Intelligence Act, five years after regulations were first proposed. The AI Act
is expected to act as a global signpost for other governments grappling with
how to regulate the fast-developing technology. “The AI Act has nudged the
future of AI in a human centric direction, in a direction where humans are in
control of the technology and where it the technology helps us leverage new
discoveries, economic growth, societal progress and unlock human potential,”
Dragos Tudorache, a Romanian lawmaker who was a co-leader of the Parliament
negotiations on the draft law, said before the vote. The Act was is intended to act as consumer
safety legislation, taking a “risk-based approach” to products or
services that use artificial intelligence or platforms which enables AI to uses
its own application of mind. When it comes to enforcement, each European Union
member country will set up their own AI watchdog, tasked with enforcing and
supervising the law for general purpose AI systems, where citizens can file a
complaint if they think they’ve been the victim of a violation of the rules.
In historic move Joe Biden the
president of United States of America has order all the federal agencies of the
state to appoint a Chief AI Officer, who will manage and plan on AI related
risks and development and come up with strategies to optimally implement AI
throughout the Agencies for better productivity and good governance.
Future perspective
Artificial Intelligence has already
begun reshaping industries and societies, but its full potential is yet to be
realized. As we look to the future, the trajectory of AI promises profound
transformations across various domains, presenting both opportunities and
challenges. One of the most significant aspects of AI's future lies in its
continued evolution and advancement. As computing power increases and
algorithms become more sophisticated, AI systems will surpass current
capabilities, enabling breakthroughs in areas such as natural language
processing, computer vision, and robotics. This evolution will lead to AI
systems that can understand and interpret human language with human-like
fluency, perceive and analyze visual information with unmatched accuracy, and
autonomously perform complex tasks with precision.
Another pivotal aspect of AI's future
is its integration into everyday life. From smart homes and autonomous vehicles
to personalized healthcare and predictive maintenance in industries, AI-driven
technologies will become ubiquitous, enhancing efficiency, convenience, and
safety. However, this proliferation raises questions about data privacy,
security, and ethical considerations, necessitating robust regulatory
frameworks and responsible AI governance.
Furthermore, AI holds the promise of
addressing some of humanity's most pressing challenges. In healthcare,
AI-powered diagnostic tools and personalized treatment plans could
revolutionize patient care, leading to earlier disease detection and more
effective interventions. In environmental conservation, AI-driven models can
analyze vast amounts of data to predict climate patterns, optimize resource
allocation, and develop sustainable solutions for mitigating climate change. However,
along with its potential benefits, AI also poses ethical, societal, and
economic challenges. Concerns about job displacement due to automation,
algorithmic bias perpetuating inequalities, and the misuse of AI for malicious
purposes underscore the need for thoughtful regulation and ethical AI
development. Additionally, the ethical implications of AI-driven decisions,
such as those in healthcare or criminal justice, demand transparent and
accountable AI systems that prioritize fairness, accountability, and human
values.
The future perspective of AI is one
of immense promise and possibility, accompanied by significant challenges and
responsibilities. As AI continues to evolve and permeate every aspect of
society, it is essential to navigate this transformative journey thoughtfully
and responsibly. By fostering collaboration among policymakers, technologists,
ethicists, and civil society, we can harness the potential of AI to improve
human lives while safeguarding against its risks. With strategic foresight,
ethical principles, and inclusive governance, we can shape a future where AI
serves as a powerful tool for positive change, advancing humanity towards a
more equitable, sustainable, and prosperous world.
Conclusion
In conclusion, the journey of
Artificial Intelligence from its conceptualization by visionaries like Alan
Turing to its current transformative impact on society underscores its immense
potential and profound implications. As we navigate the complexities of AI's
evolution and integration into various facets of life, it is imperative to
strike a delicate balance between innovation and responsibility. While AI holds
the promise of revolutionizing industries, enhancing efficiency, and addressing
pressing challenges, it also presents ethical, societal, and regulatory challenges
that must be addressed with foresight and collaboration. By fostering
interdisciplinary dialogue, implementing robust regulatory frameworks, and
prioritizing ethical AI development, we can harness the transformative power of
AI while ensuring that its benefits are accessible to all and its risks are
mitigated. As we shape the future of AI, let us remain guided by principles of
fairness, accountability, and human-centered innovation to create a world where
AI serves as a force for positive change and empowers humanity to thrive.
Article Information
CAN ARTIFICIAL INTELLIGENCE MANAGE THE AFFAIRS OF A COMPANY: A CONTEMPORARY ANALYSIS WITH COMPANIES ACT, 2013. BY: POLAVARAPU SAI CHARAN
Authors: POLAVARAPU SAI CHARAN
- Journal IJLRA
- ISSN 2582-6433
- Published 2024/04/01
- Issue 7
About Journal
International Journal for Legal Research and Analysis
- Abbreviation IJLRA
- ISSN 2582-6433
- Access Open Access
- License CC 4.0
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