Nobody questions economic damage caused by Supreme Court judgments: Sajan Poovayya

Senior Advocate Sajan Poovayya on Monday questioned why the economic consequences of Supreme Court judgments receive so little scrutiny, even in major commercial disputes involving governments and large corporations.

Poovayya was speaking in Delhi at the launch of In-House Matters, a handbook on the modern general counsel authored by Pramod Rao, Rithvik Lukose and Balanand Menon. The book draws on the experiences of 30 leading general counsel across India.

The senior advocate said,

“Nobody really questions the Supreme Court today on what's the economic damage that a judgment does or what's the economic cost."

He added that judgments continued to be viewed largely through the lens of the “march of law”, rather than by asking what economic consequences they may produce.

Poovayya said that this way of thinking had already changed in other parts of corporate law. Directors today, for instance, were expected to consider not merely their legal obligations to a company, but also how their decisions affected communities and the environment.

He said that the role of a general counsel (GC) had also fundamentally changed over the past few decades.

“The simple question that we would ask 35 years ago to a general counsel was possibly, ‘Is it permissible in law?’ The question now has really turned to simply, ‘Should we do it?’”

According to Poovayya, GCs were increasingly becoming “keepers of institutional morality”. Their task was no longer confined to deciding whether something was legally permissible. They also had to consider what a decision would mean for the organisation years later.

He described the modern GC as a lawyer, a “chief ethics officer” and a person expected to provide larger institutional direction.

Former Securities and Exchange Board of India (SEBI) Chairman UK Sinha similarly said that GCs should become part of business strategy. Sinha said that the legal team had played a leading role when ICICI was converted from a development financial institution into a universal bank. He also referred to UTI's restructuring after the 2001 crisis and said that the idea behind the eventual structure had come from a lawyer within the institution.

He added that legal teams could shape the “tone at the top” and help build institutional culture by ensuring rules were applied uniformly irrespective of seniority.

The launch was followed by a panel discussion with the three authors, moderated by Debosmita Nandy, Head - Legal at Cinépolis India, on the changing role of in-house legal teams.

The panel discussed the first 100 days of a new GC. The book recommends an “observe, orient, identify and act” approach, with new legal heads first understanding the business rather than rushing to demonstrate immediate impact.

The authors also wrote that there was no single ideal structure for an in-house legal team. Its design should reflect the needs of the business, including revenue, contract volumes and risk.