India to adopt class action suit to fight frauds

NEW DELHI, INDIA: The Government of India is planning to include the concept of class action suit in new Companies Bill to help investors claim damages from fraudulent companies. The move comes in the wake of the Satyam scam and its aftermaths that had a significant impact on investors' trust on India's corporates.

"We are planning to include class action suit in the new Companies Bill, 2008. This will help retail investors and small investors in fighting for their rights. With this bill coming into effect, the small investors, who at present are not able to get compensation in cases of fraud due to the absence of any such law, will be able to fight for justice with class action suits." PTI quoted Corporate Affairs Minister Salman Khurshid as saying.

Likely to be introduced in the current session of Parliament, class action suit is the one brought by one party on behalf of a group of individuals to file for claims against erring companies in a court of law.

Recently, the Midas Touch Investor Association, an NGO, had filed a petition with the National Consumer Disputes Redressal Commission on behalf of Satyam investors, claiming damages of Rs 4,987 crore from the company, the Raju brothers, Price Waterhouse and independent directors, alleging that they were deceived by misleading statements of the IT firm and duped into buying its shares at a manipulated price.

Meanwhile, market regulator Sebi’s amendment of regulations to prohibit companies from issuing fresh shares with superior rights vis a vis the rights of existing shareholders seems to have been taken in the light of experiences abroad.