Churn in Corporate Sector of India

In recent times, changes in corporate leadership have frequently hit the headlines not merely confined to financial dailies such cases have even claimed space in general newspapers as well.

The most recent case involves Binny Bansal who resigned as the Flipkart group Chief Executive Officer after an investigation into an alleged case of personal misconduct.

Walmart Inc. that has bought Flipkart claimed that Binny’s exit comes after an independent investigation done by it. The company also said that Binny has strongly denied the allegation. The case is just one instance of the churn in India’s corporate world.

In this article, we look at some of the prominent cases of exit by corporate leaders in India and the world. The causes behind the rising instances of churn in India’s corporate world range from personal misconduct to corruption and other cases.

Let’s take a look at some of the prominent cases-

  • BINNY BANSAL over allegations of SEXUAL ASSAULT-

Earlier this week, Flipkart group CEO and Co-founder Binny Bansal resigned on charges of serious personal misconduct.

Walmart Inc. that bought 77% stakes in Flipkart earlier this year announced that Bansal was leaving the company after an independent probe into allegations of sexual assault, showing their zero-tolerance policy while Binny denied allegations and investigators could not find evidence of assault. The probe did reveal lapses in judgement.

The resignation of the top executive created a furor in the corporate world but this was not the only case where heads rolled over allegations of misconduct.


The banking community in India received a shock on 4th of October this year when Chanda Kochhar, the CEO and MD of ICICI Bank resigned over allegations of conflict of interest.

This after a whistleblower  alleged quid pro quo by Kochhar and her family with respect to a loan granted to Videocon group whose promoter Venugopal Dhoot had investments in New Poster Renewables owned by Chanda Kochhar’s husband Deepak Kochhar.


In February, the banking sector was rocked by the Punjab National Bank fraud amounting to a massive fourteen thousand crore rupees involving Diamond Jeweller Neerav Modi and his associates caught in the net was Usha Ananthsubramanian, former CEO of Allahabad Bank. She was relieved of her position after her appear in a CBI chargesheet. She was the MD and CEO of PNB between August 2015 and May 2017, the period the scam occurred.

  • ASHOK CHAWLA over Aircel-Maxis case-

Yes Bank’s Non-executive Chairman Ashok Chawla resigned on 14th November after being named in the CBI chargesheet in the Aircel-Maxis case. This after shareholder’s stakeholders and SEBI (Securities and Exchange Board of India) started questioning his continuance on the bank’s board even after facing corruption charges.

Chawla’s exit comes at a time when the bank is struggling to find a replacement for founder and CEO Raba Kapoor after the RBI refused to extend his tenure beyond January, 2019.

  • CYRUS MISTRY over allegations-

Cyrus Mistry was sacked as the Chairman of Tata Sons in 2016 after a bitter public spat with the members of the board while Mistry alleged operation of minority shareholders and filed a petition under the Companies Act.

The board said that all operating companies except TCS (Tata Consultancy Services) were performing badly under Mistry’s leadership. However, In July this year the National Company Law Tribunal (NCLT) dismissed all charges made by Cyrus Mistry. The bench said Mistry was removed as the Chairman of Tata Sons because its shareholders had lost trust in him.

There are many surveys regarding misconducts in corporate sector which are exposing the corporate sector of India-


In as many as 50 corporate from India took part in EY Fraud Survey 2018.

According to the EY Global Fraud Survey 2018, many of the respondents interviewed reported widespread bribery and corruption in business. However, the percentage of respondents in India acknowledging the existence of these malpractices has come down from 70 % in 2012 to 40 % in 2018.

But what worrying is that these economic crimes take place even though most organisations has institutional framework on business ethics and compliance as well as code of conduct for employees.

  • PwC’s Global Economic Crime Survey 2016-

The PwC’s Global Economic Crime Survey 2016 says that 94 % of the Indian respondents stated that their organisation had a clear code of conduct but only 15 % indicated that their leaders walked the talk. 24 % also said that communication on training on ethical behavior was unclear. Many instances of fraud, bribery and corruptions do not get reported for the fear of the retaliation. Many people don’t report the fraud out of the loyalty of the company and loyalty of their colleagues.

Across the world as well the corporate world has dominated media headlines-

  • SIR MARTIN SORRELL over allegations of personal misconduct-

The world’s largest advertising and public relations company WPP’s founder and chief Sir Martin Sorrell resigned in April this year following an internal investigation into claims of possible misuse of assets and allegations of personal misconduct. According to an independent investigation conducted by WPP, Sorrell’s misconduct reportedly involved the misuse of company funds but not at a level material to the massive organisation.

WPP did not release any public details about what the allegations were or whether they are substantiated. While Sorrell denied any involvement. WPP decided to treat him as having retired after 33 years of service and he received 20 million pound as part of the exit.

  • ELON MUSK over fraud charges-

In September, this year, Elon Musk stepped down as Tesla chairman and agreed to pay 20 million dollar penalty to settle for fraud charges brought by the US over his claims about taking the company private.

Musk had in a tweet said that he was considering taking Telsa private at 420 dollars a share and had secured funding.

US Securities and Exchange Commission charged Musk with misleading investors and ensuring market chaos that hurt.


The changes in India’s corporate leadership on various counts have focus attention on the challenges of enforcing ethical norms. Experts say this is glaring in areas with regard to policies on disclosure, personal relationships at workplace, transparency among founders, senior executives and investors.

-Abhay Tiwari

Government Vs. RBI ?

Hello readers, in this article, I’m going to talk about the tussle between the Government and the Reserve Bank of India.

The central government is invoking a never-before use power under the RBI Act, one that allows it to issue directions to the central bank governor on matters of public interest given that the RBI as the central bank is intended to be an autonomous institution. This is unusual departure from the norm.

The government can issue directions to the RBI under section 7 of the RBI Act. In recent weeks the government is reported to have several letters to the RBI governor on several issues ranging from liquidity for non-banking financial companies to capital requirements of the weak banks and lending to Micro, Small and Medium Enterprises (MSMEs).

In this article, we talk about Section 7 of the RBI Act and also what led the government to to invoke it for the first time. We’ll also talk about role and functions of the RBI.

To understand this dispute between the Government and the RBI, we must understand the origin of this dispute.

Now amid the reports of mounting tension with the RBI, the finance ministry has said the government has respected autonomy of the central bank and has been holding extensive consultations within on several issues. It said both the government and the RBI in their functioning have to be guided by public interest and the requirement of the Indian economy. Let’s take a look at some factors that led to the differences between the government and the central bank which culminated in the former invoking Section 7 of the RBI Act.

Section 7 of the RBI Act which deals with management has never been invoked before in the history of independent India.

This provision took center stage earlier this year when Allahabad High Court was hearing a petition from power companies who challenged stringent NPA (Non-performing Asset) norms notified by the RBI in February referred to us the February 12th Circular. The court had asked the central government to hold consultations with the RBI under Section 7 of the RBI Act, 1934 on the way forward for stressed power assets within 15 days.

In an unprecedented move, the government has cited the never-before-used power of issuing the directions with the central bank. The government sent at least 3 letters on different issues ranging from Prompt Corrective Action (PCA) framework to liquidity management and sought consultations under Section 7 of the RBI Act which gives it powers to issue any direction to the central bank governor on the matters of public interest.

Government wrote 3 letters in fast few weeks to the RBI-


  • First letter came out exemption for power companies under PCA framework.
  • Government views that easing rules for banks under PCA could help reduce pressure on MSMEs (Micro, Small and Medium Enterprises).
  • RBI argued such a move would undo clean-up efforts.


  • Second letter pertained to use of RBI’s capital reserves for providing liquidity to market.


  • Third letter for relaxing the constraints on the banks for loans to SMEs (Small and Medium Enterprises).

Further more…

  • Government also wants the RBI to cut interest rates considering it a necessity to give the much-needed impetus to the Indian economy. But RBI has not only refused to bring key interest rates but has also raised them.
  • On October 26th, RBI deputy governor Viral Acharya made disagreement with the government, public in hard-hitting speech and blamed government for interfering with RBI’s working.

Days later on October 30th Finance Minister Arun Jaitley blamed the RBI for bad loan crisis in the country. He said that the central government had failed to check indiscriminate lending during 2008 to 2014 lending to the present NPA crisis i the banking industry.

To understand the section 7 of the RBI Act, 1934, First we have to understand the history of section 7 and the RBI.


RBI was setup on the recommendations of the Hilton Young Commission that was made in 1926. RBI formed on 1st April, 1935 during the British Raj. RBI formed as per the RBI Act, 1934. There are 61 sections in the RBI Act. RBI was nationalized in 1949.


  • SECTION 3- Establishment and incorporation the RBI.
  • SECTION 4- It lays emphasis on the capital of the bank that was 5 crore rupees.
  • SECTION 8- Composition of central board of the RBI.
  • SECTION 17- It elaborates on the business that can be carried out by the RBI.
  • SECTION 18- Emergency loans to banks.
  • SECTION 21- RBI must conduct banking affairs for central government and manage public debt.
  • SECTION 22- Only RBI has exclusive rights to issue currency notes in India.
  • SECTION 24- Maximum denomination of currency can be 10,000 rupees.
  • SECTION 42- Cash reserves of scheduled banks to be kept with the bank.
  • SECTION 45(U)- Defines Repo, Reverse Repo, Derivative Money Market Instruments and Securities.

HISTORY – Section 7 of the RBI Act-

  • RBI drafted provision combining provisions of Bank of England, 1946 and Commonwealth Bank of Australia, 1945.
  • Provision on central government’s powers to issue directions to the central bank. Central bank had however suggested that the act makes it clear that the government takes responsibility when t acts against the Governor’s advice.
  • Government at that time was not in favour of the  provision and the Clause was re-drafted.
  • Section 7 of the RBI Act amended in 1949 to empower center to issue directions to the RBI in public interest.


Subject to directions, general superintendence and direction of the affairs and business of the bank shall be entrusted to a Central Board of Directors which may exercise all the powers and do all acts and things which may be exercised or done by the bank.

The section further states that

Unless otherwise provided in regulations made by the central board, the Governor and in his absence the Deputy Governor nominated by him in this behalf, shall also have powers of general superintendence and the direction of the affairs and the business of the bank, and may exercise all the powers and do all acts and things which may be exercised or done by the bank.

-Abhay Tiwari