An Independent Director is an important aspect of corporate governance and provides supervisory guidance to the company while ensuring oversight over acts of executive directors and the management team. These vital roles put independent directors in different category from the executive directors but share the same responsibilities as the executives. The Bombay High Court in its recent rulings has ruled that independent and non-executive directors of companies cannot be held responsible for acts of the company if they are not involved in the daily affairs of running the company.

It’s well established that an Independent Director cannot be held liable for decision making which took place without such ID’s knowledge or involvement. Still Independent Directors are being dragged in every corporate fraud/default case.

In two different orders passed this month, the Court observed that simply because a person is a director of a company does not make him liable under the NI (Negotiable Instrument) Act. Only those persons who are in-charge and responsible for the conduct of the business of the company at the time of the commission of the offence will be liable for criminal action.

Click here for more details