The Indian Institute of Management (Amendment) Act 2023

What’s in Today’s Article?

• Why in News?
• What is the IIM (Amendment) Act 2023?
• Salient Provisions of the IIM (Amendment) Act 2023
• Amended Rules under the Revised IIM Act
• What Necessitated Changes in the Rules?
• How are the Powers of the Board of Governors Curtailed?

Why in News?

• The 3 grounds for dissolution of an IIM Board are expected to be spelt out in the amended Rules (under the revised IIM Act) being finalised now by the Union Ministry of Education (MoE).

What is the IIM (Amendment) Act 2023?

• The Act amends the Indian Institutes of Management Act, 2017.
• The 2017 Act declares Indian Institutes of Management (IIMs) as institutes of national importance and regulates their functioning.
• IIMs provide post-graduate education in the field of management and allied areas.

Salient Provisions of the IIM (Amendment) Act 2023

• Visitor: The Act designates the President of India as Visitor of every Institute covered by the Act.
• Appointment of the IIM Directors:
  • Under the 2017 Act, the Director of an IIM is appointed by the Board of Governors, based on the recommendations of a Search-cum-Selection Committee.
  • The 2023 Act mandates the Board to obtain the prior approval of the Visitor before appointing an Institute Director.
  • The procedure for selecting the Director will be prescribed by the central government.
• Composition of the Search-cum-Selection Committee:
  • Under the 2017 Act, the Search Committee comprises the Chairperson of the Board, and 3 members from amongst eminent administrators, industrialists, educationists.
  • The 2023 Act reduces these 3 members to 2, and adds another member to be nominated by the Visitor.
• Removal of the IIM Director:
  • Under the 2017 Act, the Board may remove the Director from office on grounds such as: (i) insolvency, (ii) mental and physical incapacity, (iii) conflict of interest.
  • The 2023 Act adds that the Board will require prior approval of the Visitor before removing a Director.
  • It also grants the Visitor the authority to terminate the services of the Director, as may be prescribed.
• Appointment of the Chairperson of the Board of Governors:
  • Under the 2017 Act, the Chairperson of the Board of Governors of each Institute is appointed by the Board.
  • The 2023 Act amends this to provide that the Chairperson of the Board will be nominated by the Visitor.
• Inquiries against IIMs:
  • The 2017 Act empowers the Board to initiate an inquiry against an Institute if it has not been functioning in accordance with the Act. A retired HC judge conducts such inquiries and based on its findings the Board may take action.
  • The 2023 Act confers the power of inquiry upon the Visitor. The Visitor may appoint persons to review the work of any Institute and hold inquiries into its affairs.
  • Based on the report of such inquiries, the Visitor may issue directions which will be binding on the Institute.
• Dissolution of the Board:
  • The 2023 Act provides that the central government may prescribe the conditions and procedure for dissolving or suspending an Institute’s Board.
  • If a Board is suspended or dissolved, the central government will constitute an interim board for six months or until a new Board is constituted.

Amended Rules under the Revised IIM Act

• The grounds under which the Government of India will get to invoke powers to dissolve the board of any IIM are likely to be: i) persistent disobeying of its orders, ii) public interest and iii) inability of the board to perform its duties.
• While the amendment to the IIM Act granted the President the authority to remove the director of an IIM, the Rules are expected to explicitly state that the institute’s Board is obligated to follow the decision of the Visitor in this regard.
• The Rules are also expected to firmly establish the educational qualifications of an IIM Director.
• The amended Rules are also expected to specify that any candidate or applicant for the position of an IIM Director should possess a first-class degree at both the Bachelor’s and Master’s levels, in addition to a Ph.D/ an equivalent qualification.
  • Currently, under the unamended Rules, an IIM Director’s academic credentials are described as “a distinguished academic with a PhD or equivalent”.

What Necessitated Changes in the Rules?

• The amendment of the Rules under the IIM Act has been necessitated by recent changes to the law.
  • In a surprising move, the MoE had introduced an amendment Bill for the IIM Act during the monsoon session this year, significantly diluting the absolute autonomy granted to the 20 IIMs five years ago in 2018.
  • The changes were made to entrust the management accountability of the IIMs with the President, which were vested in the IIM Board earlier.
• The provision on educational qualifications comes in the wake of the IIM Rohtak case, where the incumbent Director had misrepresented his academic credentials during his initial appointment.

How are the Powers of the Board of Governors Curtailed?

• The Board of Governors is the highest decision-making body in an IIM.
• Earlier, only the Board of Governors in an IIM had the powers to audit the functioning of the institute and remove or appoint directors. The Union government had little say in the matter.
• This changed 3 months ago when the MoE amended the IIM Act to assert more authority over the business schools, including giving itself powers to dissolve an IIM Board.
• The changes to the IIM Act clearly stated that henceforth the President (in her capacity as the Visitor of all IIMs) is empowered to dissolve the Board.
• While the Ministry appoints an interim Board in its place, the extent of this power is now being defined under the Rules of the amended IIM Act.

Q1) What is the Institutes of Eminence (IoE) scheme?

IoE is a recognition scheme for higher education institutes in India, set by the University Grants Commission in 2017. The plan encompasses twenty institutions, which are granted more autonomy, both administratively (e.g., setting fees) and academically.

 Q2) What are the institutes of national importance?

Institute of National Importance is a status that may be conferred on a premier public higher education institution in India by an act of Parliament of India. They receive special recognition, higher autonomy and funding from the Government of India.

Source: Govt identifies three grounds to dissolve IIM Boards: From ‘public interest’ to ‘persistent disobedience’