GENDER DISCRIMINATION ON CORPORATE BOARD: A STUDY IN THE LIGHT OF MURUGAPPA CASE BY - LAKSHMY S & DR. P V NAGENDRA SARMA
AUTHORED BY - LAKSHMY S & DR. P V
NAGENDRA SARMA
Abstract:
In today's era, the discussion of the
position of women in various fields is much discussed. Looking at the Vedic
period, the discussion on the social standing of women was non-essential, as in
this period they enjoyed their position as equal to the position enjoyed by
men. The situation changed in the succeeding period. The drastic change in
women's position has later been seen in almost all sectors. Here, the article
is dealing specifically with women's positions on corporate boards. The
corporate sector is a fascinating one for a common guy. This sector is part of
any country's economic development, and the income provided by this sector is
an attractive one for common people. The purpose of this paper is to analyse
whether the perks of working in the corporate sector are the same for all,
i.e., without any gender discrimination. The same is studied with the help of a
recent case, Ambadi Investment Ltd. v. M. V. Valli Murugappan.
INTRODUCTION
India is at a rapid pace of
development. Each sector is up to it. The Indian corporate sector is one of
them. Once, this sector was lacking investor confidence as many big companies
and financial institutions turned to fraud. Investor confidence was slumping.
The loopholes in our legal system make the situation even worse. The bummer
required the Indian government to make the laws more sufficient. The SEBI Act,
the IBC Code, the Companies Act, 2013, etc. were introduced in the later stages
to strengthen the laws, boost investor confidence, and thereby magnify this
sector. The Indian government has eased many laws and procedures for the
companies to make working friendly. Despite all these benefits, the industry lacks
a supportive atmosphere for women in senior managerial roles.
India is known for family business. In
India, family enterprises have a long history, with many of them lasting
through the generations to play a crucial role in the country's economic development.
Since independence, a large number of new-generation family enterprises
inspired by the ideals of the promoters and owners have emerged as a result of
entrepreneurial passion and ambition. Startups increased dramatically around
the turn of the century, but family companies have thrived nonetheless,
contributing 79% of the nation's annual GDP. With families owning and operating
more than two-thirds of all enterprises worldwide, this is in keeping with
current trends.[3]
In terms of women's representation,
especially in the top managerial positions of companies, most women get it as a
legacy, except a few. There is no cynicism about women's capacity to reach
the top corporate managerial position. But there are many factors that actually
pull women back from achieving something of this kind. Generally speaking,
women encounter substantially fewer difficulties in family businesses. The
Murugappa case, among other recent occurrences, demonstrates that things are
not as simple for them as they apparently seemed.
The paper tries to analyse the
present position of women in the corporate sector through the Murugappa case.
The
Murugappa Case
The petitioner, Valli Murugappan,
filed this case in the NCLT, Chennai, which is M. V. Valli Murugappan, Anr. v.
Ambadi Investment Pvt. Ltd., and 13 others. The petitioner filed this case
under the provision of oppression and mismanagement. Valli Murugappan's 8.15
percent stake in the company makes her a minority shareholder. The Companies
Act 2013 provides provision for application to a tribunal in cases of
oppression, etc.[4] The
petitioner makes a waiver application under Section 244 of the Companies Act,
2013.[5]
The provision allows the Company Tribunal to waive all or any of the
requirements specified in section 241 Cl (a) or 241 (b)[6],
if any application made to it in this behalf.
The case also points out the gender
discrimination prevailing in the corporate world in the present century. Valli
Murugappan is the daughter of M V Murugappa, who was the executive chairman of Murugappa
group of companies. After
his death in 2017, M V Murugappan left his wife and two daughters his 8.15%
stake in Ambadi Investments, the group holding firm, through a probate.[7] The
Murugappa family owns 91% of the publicly traded, unlisted business. Murugappa
Group companies run family businesses, and only MV Murugappa is the one who has
no son. After her father’s demise the petition demanded for her position.
Before the other branches of the
Murugappa group family, she had put out two proposals: either buy her family's
8.15% share in Ambadi Investments Ltd. at a reasonable valuation, or offer her
or her sister Vellachi Murugappan a seat on the board. The Hindu Succession
(Amendment) Act, 2005 allows females to inherit equally with sons and allows women
to become the karta, or head of the family.[8] The
karta of the MVM Hindu undivided family, who owns the share in Ambadi Investments
Ltd., is Arunachalam. Ambadi Investments Ltd. is a Systemically Important
Non-Deposit Accepting Core Investment Company (CIC) that is registered with the
Reserve Bank of India (RBI). Its primary function as a Core Investment Company
is holding company, with investments in other group firms and subsidiaries.[9] The
Murugappa group first approved her demand but never executed it.
Mrs. Arunachalam is alleging that it
is pure gender discrimination as her family is a male-dominated one and only M.
V. Murugappa has no son, only daughters. Till today, in their family business,
no women get a position or involvement.
She had claimed that the other
members of her family had excluded her from the board solely because of her
gender. She filed the suit after the all-male board, which consisted of her
uncles and cousins, decided unanimously to deny her request to join the holding
company's board of directors. In order to proceed with her claim against Ambadi
Investments, Valli and her family have filed waiver application with the NCLT[10]
in Chennai, demanding a relaxation of the minimum shareholding threshold of
10%.[11]
The case was filed in the year 2020,
and now, in 2023, the case has reached settlement.
Within the next ninety days, the
family members agree to complete the required transactions to implement the
family arrangement," the group stated. In keeping with the conditions of
the family arrangement, "the parties have also agreed that all legal
proceedings between the family groups will be withdrawn after all agreed steps
specified in the family settlement have been completed," the group said in
a statement.
According to the group's statement,
the primary objectives of the family arrangement are to preserve harmony within
the Murugappa family for the present as well as the future, as well as to
nurture amity and goodwill among its members. Based on the family's 8.23%
interest in the group's holding company, Arunachalam had asked a board seat.[12]
After the settlement, the varied
group may enter a stable period as a result of the litigation being withdrawn.[13]
Postulation in the Murugappa Group
Case
Even though the case has been
settled, the practices that have been adopted by the Murugappa group of
companies have never been right. The incident shows the corporate outlook
towards women's leadership. Many have been talking about women's empowerment,
and in many fields, visible changes have been seen with respect to women's
empowerment. The corporate sector is no exception to this. Surprisingly, the
Murugappa group's attitude towards women on board was never questioned by
anyone. Even the incident never had an impact on investor confidence. The case
was filed by Valli Arunachalam in the year 2020, and it was settled in the year
2023. The Murugappa Group of Companies' growth figures can be analysed to
determine that the company grew by 31% in the fiscal year 2022 and 36% in the
following year. Even though the case got much attention from the public, the
end result was such that they considered it a family dispute. In India, the
corporate sector has been influenced by family businesses. For a woman, to make
her position in the managerial position is a herculean task, but it is visible
that if she is part of a business family, then it is comparatively easy for her
to make her position. This case was against such notion. They were impaired by
the gender biased system within this sector. They fought for their rights. The
intention of the gender discriminators was unsuccessful in the end. So much of
the struggle was with the daughters of Murugappa, which is a shame for this industry.
If they had been sons, the situation would have been different.
The Legal Scenario:
The Companies Act 2013 has changed
the decade old 1956 Act. But coming to the women empowerment no much provisions
have been added.
Section 149 of the Companies Act,
2013 and the Companies (Appointment and Qualifications of Directors) Rules,
2014 (‘Rules’) deal with the provisions relating to women and independent
directors of a company.[14]
Every listed company, every other public company having paid up share capital
of Rupees 100 crore or more or having turnover of Rupees 300 crore or more
should have appointed at least one women director on board. A resolution with
respect to this must have been passed prior to the appointment of women
director.
There is no specific penalty for
non-compliance of this provision. Generally, section 172[15]
is applicable for non-compliance of section 149 of the Companies Act, 2013. It[16]
provides that violation of section 149 may result in fine which is not less
than Rs. 50000 and may extend up to Rs. 500000.
Conclusion
Women should participate in higher
level decision making processes rather than just playing simple roles in
corporations as part of the women's empowerment movement. Based on the
information at hand, European nations are the leaders in designating women
directors to corporate boards. Norway leads the group with 45%, while India has
just 4.7%. Gender discrimination is one that prevents women from achieving the
position. Today, it is also prevalent. The Murugappa case is the best example.
Many studies have shown that women have better leadership qualities. It may
boost the company. By analysing the laws with respect to this, it has been
found that nothing much has been in support of women on board except the one
women director mandate. More changes should be brought about, and more
awareness sessions should be conducted for the company owners.
[1]Lakshmy S (Phd Rsesearch Scholar,
School of Law, HITS, Chennai)
[2] Prof. Dr. P V Nagendra Sarma
(Professor and Dean, School of Law, HITS, Chennai)
[3] Priyavrata Mafatlal, Family
Businesses- Leading the “Make in India’ Movement, The Times of India,( Oct.1,
2023, 10 AM), https://timesofindia.indiatimes.com/blogs/voices/family-businesses-leading-the-make-in-india-movement
[4] Section 241, The Companies Act,
2013
[5] The Companies Act, 2013. ACT NO.
18 OF 2013.
[6] Ibid
[8] Section 6, Hindu Succession Act,
1956
[9] T E Narasimhan, Succession saga at
Murugappa group gets murkier, Rediff.com, (10 Nov, 2023, 10 AM), https://www.rediff.com/money/report/succession-saga-at-murugappa-group-gets-murkier---/20210311.htm
[10] National Company Law Tribunal
[11] The Hindu Business Line, https://www.thehindubusinessline.com/companies/valli-arunachalams-battle-for-board-space-ends-as-murugappa-family-settles-disputes/article67216166.ece
(Nov.13, 10 PM)
[12] Priyanka Gawande, out of court
deal ends Murugappa family feud, Mint, https://www.livemint.com/companies/news/outofcourt-deal-ends-murugappa-family-feud-11692554418218.html
[13] Ibid
[14]Woman Director and Independent
Director under Company Law Regime, Mayashree Acharya, https://cleartax.in/s/woman-director-and-independent-director-company-law-regime
(Nov 28, 11 AM)
[15] The Companies Act 2013
[16] Ibid