Responsibility of Non-Executive Director in case of offences

      

  • The directors of the company can be divided into two categories as Executive Director and Non – Executive Directors.
  • Non-Executive director doesn’t actively participate in affairs of the company. His duties are of an intermittent nature to be performed at periodical board meetings,
  • As per Section 149(12) (ii) of the Companies Act, 2013 The non-executive director not being promoter or key managerial personnel, shall be held liable, only in respect of such acts of omission or commission by a company which had occurred with his knowledge, attributable through Board processes, and with his consent or connivance or where he had not acted diligently.
  • Whether the concept of Doctrine of Vicarious Liability is applicable to the Non – Executive Directors?

Meaning of Doctrine of Vicarious Liability: – Vicarious liability refers to a situation where someone is held responsible for the actions or omissions of another person. 

Supreme Court of India in its judgment in the case N. Rangachari vs Bharat Sanchar Nigam Ltd on 19 April, 2007, stated that there shall be no vicarious liability unless the statue specifically provides so.

We all know a company is a legal entity and does not have any physical existence. Therefore, officers of a Company who are responsible for acts done in the name of the Company are sought to be made personally liable for acts. However NED may not be held liable if he able to prove that the offence was committed without his knowledge or that they had exercised all due diligence to prevent commission of the offence.

  • In the case of Poonam Garg (appellant) vs Sebi on 22 March, 2018 the non-executive director cannot always take immunity under the provisions of section 149 (12)(ii) of the Companies Act 2013.

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