The Business Judgment Rule in Practice: Evaluating Directors' Decision-Making and its Legal Framework in India

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Swagat Dash, Kriti Bhatt, Prithivi Raj

Abstract

Company law protects directors from personal liability for decisions made within their authority under the Business Judgment Rule (BJR). India's 63rd spot in the 2021 Ease of Doing Business index shows how regulatory frameworks affect investment trends. This method relies on directors' authority to take bold measures, which is shielded by the Business Judgment Rule (BJR) from court review. This option decreases the cost of hiring qualified directors and helps recruit highly experienced leaders. Despite its merits, the BJR raises questions and debates over its interpretation and execution. There are debates over whether it is a standard of review or non-review, its formalization, and if it should be a 'presumption in favor of directors' or a'safe harbor.' The BJR is more of a "standard of non-review" than a "standard of review." An study shows that Section 463 of the Indian Companies Act, 2013, which apparently formalizes the Business Judgment Rule (BJR), misrepresents it. In its deference to business decisions, the Indian judiciary does not explicitly follow the Business Judgment Rule (BJR). A formal Business Judgment Rule (BJR) code in India is not urgently needed. Instead, courts should utilize it as a 'presumption' in favor of directors. This paper clarifies BJR uncertainties to develop a more rational and efficient application in Indian corporations. This paper aims to explain the Business Judgment Rule and its implementation in India. The text discusses the BJR's origins, logic, and limits. This paper explains the BJR and its deployment in India to improve directors' decision-making and corporate governance.  

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How to Cite
Swagat Dash, Kriti Bhatt, Prithivi Raj. (2024). The Business Judgment Rule in Practice: Evaluating Directors’ Decision-Making and its Legal Framework in India. European Economic Letters (EEL), 14(2), 714–728. https://doi.org/10.52783/eel.v14i2.1394
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