Independent directors were supposed to safeguard the interest of all stakeholders.
Dev Chatterjee reports.
With several independent directors quitting Jet Airways just before the airline shut its operations, corporate lawyers said all board members are equally liable for the crisis.
This is because they failed to put a proper risk management system in place.
In the last one year, the airline's independent directors -- Vikram Mehta, Rajshree Pathy, and Ranjan Mathai -- have resigned from the board, citing either lack of time or not giving any specific reason.
Mehta, according to the Jet Airways annual report, was heading the risk management committee of the airline which did not meet a single time in fiscal 2017-2018.
Former Competition Commission of India chairman Ashok Chawla and former banker Sharad Sharma continue to remain on the Jet board as independent directors.
The promoter-directors led by its chairman Naresh Goyal and his wife Anita have already quit the airline.
Nasim Zaidi also quit from the board as non-executive, non-independent director.
Another independent director, Srinivasan Vishvanathan (head of the audit committee whose term expired on August 9), ceased to be member of the board since conclusion of the annual general meeting of shareholders last year.
"The independent directors have a fiduciary role to keep shareholders informed about the status of the airline and whether proper risk management system was in place. Just by resigning, they cannot escape liability," says Shriram Subramanian, founder and managing director, InGovern, a proxy advisory firm.
The role of independent directors has come into sharp focus when the Centre sacked the entire IL&FS board, including the independent directors, in September last year after the infrastructure company failed to repay its debt worth Rs 94,000 crore.
The Serious Fraud Investigation Office is looking into the role of IL&FS independent directors in the financial meltdown of the infrastructure financier.
Corporate lawyers said the independent directors will have to answer questions considering they were on the board and were supposed to safeguarding the interest of all stakeholders, particularly the minority shareholders.
In the last one year, Jet has lost 76% of its value and since November last year, it lost half of its market value.
Lawyers said the action taken by the board on the allegations made by whistle-blower Arvind Gupta about fund diversion from the airline to its promoter's private entities will be keenly watched.
The SFIO is already investigating the airline's accounts following Gupta's allegations.
Gupta, who was also a whistle-blower in ICICI Bank's former CEO and MD Chanda Kochhar and Videocon controversy case, said the lenders did not aggressively pursue his complaint in the Jet Airways matter.
In a letter to the prime minister's office and the finance ministry, Gupta sought forensic audit for the last 10 years into the airline's books.
But he said the banks investigated only part of the allegations by audit firm, EY.
EY, on the other hand, has not given any clean chit to the airline and not conducted a full scale forensic audit, said a source close to the development.
"The banks will now have to write off the entire dues to Jet Airways worth Rs 8,500 crore," says Gupta.
"Had the lenders taken action on my complaint earlier, the closure of the airline could have been avoided."