Govt mulls special courts for class suits

Written by Neha Pal | New Delhi | Updated: Jan 3 2010, 04:21am hrs
The ministry of corporate affairs (MCA) is planning to set up special courts for taking up the class-action suit cases for the protection of the interests of the investors. An MCA said, The ministry is contemplating on setting up special courts to take up the class-action suit cases. In India, at present, there are no legal provisions for the class-action suits".

In US, the class-action suit comes under the Federal Rules of Civil Procedure, Sarbanes-Oxley Act-2002 and Securities Exchange Act of 1934. In Australia, it comes under Corporations Act 2001, Federal Court of Australia Act 1976 and Australian Securities and Investment Commission Act. In UK, it comes under, Market Abuse Directive issued by EU and Financial Services and Markets Act.

According to experts, there is a need for special courts because the introduction of class action suit in India would increase the number of cases which would also include frivolous cases and the Indian courts are already overloaded with large number of litigations.

According to taxation and corporate law expert, Vinod Gupta, Even though the class action suit is prevalent in other countries but in the Indian context, it may not be a good idea as anybody can go to the Court of Law and stop the deals which the organization intends to take".

Hiten Kotak, executive director, Pricewaterhouse Coopers Pvt Ltd believes that in other countries, class action suits are taken by those who are actually affected but the introduction of this concept in India might be used in an adverse manner by competitors of the companies.

According to Midas Touch Investors Association (MTIA) which is a non-profit organisation in the field of protection of small investors, there is no distinction between risk and fraud in securities market and corporate sector. It is generally presumed that the investors carries risk of fraud at his cost and in the event of losses suffered due to fraud, is not entitled for any compensation.