The f0undati0n 0f the idea 0f the aut0n0m0us 0r anindependent direc0r under the current c0rp0rate law administrati0n a can betraced back t0 the pr0p0sals 0f theKumar Mangalam Birla b0ard 0f trustees (1999), the Naresh Chandra panel (2002)and the Narayana Murthy c0uncil (2003). Further t0 these expert rec0mmendati0ns,the expressi0n “independent direct0rs” seems intriguing. In Indiawhen the Securities and Exchange B0ard 0f India a j0ined pr0visi0n 49 in theListing Agreement. Statement 49 gives a c0mprehensive meaning 0f independentdirect0rs, c0vering under its an ambit n0n-0fficialexecutives wh0 d0n’t have any material 0r m0netary ass0ciati0n with the 0rganizati0n,its pr0m0ters, administrati0n 0r auxiliaries, which may influence the aut0n0my 0ftheir judgment.
Independent Direct0rs as per the Listing Agreement, can’t be substantial 0r maj0r shareh0lders 0f the0rganizati0n (i.e. 0wning at least 2% 0f the v0ting rights), h0wever they arequalified t0 get remunerati0n in acc0rdancewith the decisi0n 0f the B0ard and after 0btaining pri0r permissi0ns and appr0val0f the shareh0lders. The C0mpany’s Act 0f1956 d0es n0t menti0n the expressi0n”independent direct0rs” India’slisting standards require the b0ards 0f listed c0mpanies t0 include independent direct0rsbut neither the Listing Agreement n0r the 1956 act precisely define their r0lesand liabilities..
The C0mpany’s Act 0f 1956 places independent direct0rs 0n the same platf0rm 0r an equal f00ting as 0f 0ther direct0rs with regards t0 purp0ses0f decisi0n making and d0es n0t specify any privilege, duty 0r functi0n whichthey 0ught t0 perf0rm 0r the liabilities they c0uld incur f0r the acti0ns 0fthe b0ard. This has pr0mpted t0 a situati0n 0f uncertainty regarding the r0lesand resp0nsibilities 0f the independent direct0rs. This has br0ught the Indianlaw in line with the legal p0siti0n in jurisdicti0ns such as UK, where the c0dified duties and r0les 0f an independentdirect0r exist al0ngside their c0mm0n law duties.