[1] For a discussion of the competing theories and the relevant literature, see Andrew Keay, ‘Stakeholder Theory in Corporate Law: Has it Got What it Takes?’ (2010) 9 Rich J Global L & Bus 249; Sarah Kiarie, ‘At crossroads: shareholder value, stakeholder value and enlightened shareholder value: Which road should the United Kingdom take?’ (2006) 17 ICCLR 329.

[2] This principle was effectively summed up by the UK Company Law Review Steering Group when it said, while considering a possible statutory formulation of a duty to promote the success of the company: “… what is in view is not the individual interests of members, but their interests as members of an association with the purposes and the mutual arrangements embodies in the constitution…” Company Law Review Steering Group, Modern Company Law for a Competitive Economy: Developing the Framework (Department of Trade & Industry, 2000), para 3.51.

[3] For a duty to consider the interests of creditors, see generally, Liquidator of West Mercia Safetywear Ltd v Dodd (1988) 4 BCC 30; Facia Footwear Ltd (In Administration) v Hinchliffe [1998] 1 BCLC 218; Re Pantone 485 Ltd [2002] 1 BCLC 266; Gwyer v London Wharf (Limehouse) Ltd [2003] 2 BCLC 153; [2002] EWHC 2748; Re MDA Investment Management Ltd [2004] BPIR 75; [2003] EWHC 227 (Ch).

[4] Kuwait Asia Bank EC v National Mutual Life Nominees Ltd [1991] 1 AC 187; Yukong Line Ltd v Rendsburg Investments Corporation (No. 2) [1998] 1 WLR 294.

[5] Reinier  Kraakman, et al, The Anatomy of  Corporate Law (Oxford: Oxford University Press, 2nd ed, 2009), 12-  14.

[6] See generally, for a broad outline, Paul Davies, ‘Enlightened Shareholder Value and the New Responsibilities   of Directors’, Inaugural W.E. Hearn Lecture, University of Melbourne Law School (2005). Davies also clarifies that directors’ duties to act in “the interests of the company” identifies the company with one or more groups of people who, in the case of a solvent company, ought to be its members (or shareholders). Paul Davies,

[7] The question was in a sense central to the Berle-Dodd debate that occurred decades ago. AA Berle, Jr,

‘Corporate Powers as Powers in Trust’ (1931) 44 Harv L Rev 1049; E Merrick Dodd, Jr, ‘For Whom are Corporate Managers Trustees?’, (1932) 45 Harv L Rev 1145 (with Berle arguing that companies must have responsibilities only to shareholders, and Dodd arguing that companies must be responsible for other constituencies such as employees, customers and the general public).

[8] Varottil, ‘The Evolution of Corporate Law in Post-Colonial India’.

[9] Ibid.

[10] See Tarun Khanna  & Krishna Palepu, ‘Globalization  and Convergence in  Corporate Governance: Evidence  from Infosys and the Indian Software Industry’ (2004) 35 J Int’l Bus Studies 484 (laying out the debate in the context of protection of employees using the stakeholder theory).

[11] Companies Act, 1956, s. 529-A.

[12] Companies Act 1956, s. 391. See In Re, River Steam Navigation Co. Ltd (1967) 2 Comp LJ 106 (Cal.) (holding that in considering any scheme proposed, the Court will also consider its effects on workers or employees); In

Re Hathisingh Manufacturing Co. Ltd(1976) 46 Comp Cas 59 (Guj) and Bhartiya Kamgar Sena v Geoffrey Manners & Co Ltd (1992) 73 Comp Cas 122 (Bom) (approving the proposition that while sanctioning a scheme of arrangement the court should consider not merely the interests of the shareholders and creditors but also the wider interests of the workmen and of the community).

[13] Companies Act, 1956, s. 443.See National Textile Workers’ Union v Ramakrishnan (P.R.)A.I.R. 1983 SC 75 (holding that a court can hear the employee if it determines the employee should be heard to administer justice).

[14] Report of the Expert Committee on Company Law, May 2005 (“Irani Committee Report). Available at: http://reports.mca.gov.in/Reports/23-

Irani%20committee%20report%20of%20the%20expert%20committee%20on%20Company%20law,2005.pdf.

[15] Irani Committee Report, Part 3, Chapter IV – Management and Board Governance, Duties and Responsibilities  of Directors, paras 18.1 – 18.3, pp. 43 – 44

[16] Twenty-first Report, Standing Committee on Finance (2009-2010) (Fifteenth Lok Sabha), The Companies Bill, 2009 (Ministry of Corporate Affairs), Lok Sabha Secretariat, New Delhi, August 31, 2010. Available at:http://www.prsindia.org/uploads/media/Companies%20Bill%202009.pdf.

[17] Ibid, para. 11.77.

[18] Ibid, para. 11.78.

[19] Ibid, para 11.80.

[20] It is also interesting to note that around the time the Standing Committee was deliberating upon these issues, business associations in India were also moving towards a pluralist approach. Illustratively, one may consider the recommendations of the Murthy Committee constituted by NASSCOM, a premier trade body of the Indian IT/BPO industry. The Committee was constituted to make recommendations in the aftermath of the Satyam

scandal which had emerged by then; where a leading Indian IT company had admitted to large-scale irregularities. The Murthy Committee also leans towards a pluralist approach towards directors’ duties; and in exploring the interests of non-shareholder parties, it considers not just stakeholders such as employees and customers, but also vendors and even competitors. NASCOMM, Corporate Governance and Ethics Report (2010), available at: http://survey.nasscom.in/sites/default/files/upload/66719/Corporate_Governance_Report.pdf.

[21] The point that there may be two duties does not detract from the proposition, discussed later, that both the duties are of good faith.

[22] Cutler v. Wandsworth Stadium [1949] AC 3398 at 407.

[23] Companies Act, 2013. ‘Creditors’ as a category of stakeholders are conspicuous by their absence in the statutory provision, and hence are not stated beneficiaries thereof. In the UK too, while section 172(1) of the 2006 does not expressly include creditors as a beneficiary of the provision, section 172(3) preserves the interests of creditors under general law (which presumably encompasses insolvency law). French, et al, Mayson, French & Ryan on Company Law (Oxford University Press, 2014), p. 483.

[24] WVH Rogers, Winfield & Jolowicz on Tort(18thed, Sweet & Maxwell, 2010), p. 387. They give the example of Mid Kent Holdings v General Utilities [1997] 1 WLR 14, where a literal interpretation of section 93A the (UK) Fair Trading Act 1973 would have led to what is termed as an ‘extraordinary’ result “…of allowing any of the

whole population to bring proceedings to enforce an undertaking to the Minister…” It is submitted that an interpretation of section 166 giving a cause of action to members of the ‘community’ would be no less extraordinary.

[25] Caparo Industries v Dickman [1990] 2 AC 605

[26] Customs & Excise Commissioners v Barclays [2006] UKHL 28.

[27] Winfield & Jolowicz on Tort (2010), p. 161

[28] Lord Templeman’s statement in Winkworth v Edward Baron Development Co. [1986] 1 WLR 1512 that a company owes a duty to future and present creditors to preserve its assets, is presumably limited to the context of a company which is unlikely to remain solvent. See Goode, Principles of Corporate Insolvency (3rd ed, Sweet & Maxwell, 2005), p. 522.

[29] Miller v. Bain [2002] 1 BCLC 266; DD Prentice, ‘Creditors Interests and Directors Duties’ (1990) 10 OJLS

275.

[30] An extensive body of literature affirms this point in the context of section 172 of the 2006 Act in the UK. This    is more so because section 170(3) expressly states that directors’ duties are owed to the company. Kiarie, ‘At crossroads’, p. 331; Tate, ‘Section 172 CA 2006’; Andrew Keay, ‘The Duty to Promote the Success of the Company: Is it Fit for Purpose?’ (2010), available at http://ssrn.com/abstract=1662411, p. 13;Martin Gelter & Genevieve Helleringer, ‘Lift Not the Painted Veil! To Whom are Directors’ Duties Really Owed?’ [2015] Ill L Rev 1069, at p. 1095; Lynch, ‘Section 172’, p. 200; Ahmed Al-Hawamdeh, et al, ‘The interpretation of the director’s duty under section 172 Companies Act 2006: insights from complexity theory’ [2013] JBL 417, at p. 420.

[31] In Percival v Wright [1902] 2 Ch421 it was established that directors owed their duties to the company and not directly to shareholders.

[32] It must be pointed out that loss suffered by individual creditors is not recoverable directly. Analogous to

principles barring direct claims by shareholders in respect of breaches to the company, the loss to creditors is ‘a reflection of the loss to the company’, and the liquidator can recover this in the name of the company. Any recovery will go to increase the general pool of assets available in liquidation. See: Johnson v. Gore Wood & Co., [2002] 2 AC 1; Goode, Principles of Corporate Insolvency, at 522-523.

[33] Employees may have a right to sue under applicable labour laws; other stakeholders may have some specific remedies: that however, does not answer the question in principle regarding the enforcement of directors’ duties in company law, of which stakeholders are the ultimate beneficiaries.

[34] See n. 46 above.

[35] For this reason, the approach was jettisoned in the UK in favour of the ESV approach.

[36] See Vikramaditya Khanna & Umakanth Varottil, ‘Board Independence in India: From Form to Function?’ in Harald Baum, et al, Independent Directors in Asia: A Historical, Contextual and Comparative Approach (Cambridge University Press, 2016 forthcoming), available at http://ssrn.com/abstract=2752401, p. 26.

[37] Keay, ‘The Duty to Promote the Success of the Company’, p. 18;Mark Arnold & Marcus Haywood, ‘Duty to Promote the Success of the Company’ in Simon Mortimore QC, Company Directors: Duties, Liabilities, and

Remedies (Oxford University Press, 2013), p. 257. It is to avoid such a situation that the UK adopted the ESV approach that will make boards accountable to at least one constituency, viz. shareholders.

[38] Companies Act 2006, s. 172(1).

[39] See Keay, ‘Stakeholder Theory in Corporate Law’, p. 287.

[40] Lynch, ‘Section 172’, p. 201.

[41] See Keay, ‘Stakeholder Theory in Corporate Law’, p. 287.