India’s legal elite on scandal, innovation and pressure for reform

Just days before their law firms respectively announced a groundbreaking alliance with a top London firm and took on the assignment of advising the company that has been dubbed ‘India’s Enron’, AZB & Partners managing partner Zia Mody and Amarchand & Mangaldas & Suresh A Shroff & Co managing partner Cyril Shroff appeared together on the Indian edition of CNBC, for a wide-ranging discussion of the year past and what lies ahead for the Indian business and legal communities. Here’s the video of the 3 January broadcast and a full transcript.

Mody, whose AZB recently entered into a best friends referral arrangement with Clifford Chance, said she was struck by the rise of shareholder activism in India, citing the examples of metals company Vedanta and outsourcing company Satyam, where shareholder opposition had derailed questionable deals.

“The Vedanta response and the Satyam response are things that maybe 10 years ago we would not have expected to happen in the public place, so that has been extremely interesting,” said Mody.

On 7 January, Satyam founder Ramalinga Raju (pictured) admited to a massive accounting fraud, including the faking of some RUP50bn (£738m) in cash reserves. Over the weekend, Amarchand was tapped to advise the board of directors on the scandal.

In his 3 January CNBC appearance, Shroff offered some thoughts on the state of corporate governance in India. “There are still large parts of corporate India which only pay lip service to good corporate governance,” he said. “It has become more a matter of form rather than of substance. When you look back, you look back with a little sadness that after all the effort that has been spent, there are still important companies which trivialise this.”

But he also noted that private lawyers may need to pay more attention to governance issues themselves. “Clients always come to us and tell us to find a solution to work around such regulations, and innovation has normally been the mantra we distinguish ourselves by. But, as we are seeing this governance theme become more [prominent], it’s going to force people like us to innovate and force us to become a little more cautious and a little more conservative,” he said.

Both lawyers expressed some doubt about the ability of India’s famously bureaucratic government to respond to the global economic crisis. Mody said regulators need to think of innovative instruments for capital-raising because Indian companies are still poised for growth, even if the rate is down from previous years. “If legislation and government actually hinders that growth rate,” she said, “then they have a lot to answer for, and they don’t have to do much to help it.”