The Ministry of Corporate Affairs in its notification dated 2nd March 2020 has issued clarification that the prosecution proceedings against the independent and non-executive directors shall not be initiated unless there is strong evidence of their complicity in frauds committed by the companies.
The whole time director and the key managerial personnel would be liable for default committed by a company. In the absence of key managerial personnel, the director who have expressly given their consent for incurring liability in e-form GNL-3 filed with the registrar would be liable. However in cases where the penal provision in the Act hold a specific director or officer or any other person accountable for the default in such cases, action should be initiated only against such director.
The filing of information/records with the registry, maintenance of statutory registers or minutes of meeting or compliance is not the responsibility of independent directors or non-executive director unless specific requirement is provided. Therefore serving notice to the company during inquiry, inspection, investigation, etc shall be on the concerned officer of the company. In case, lapse are attributable to the decisions taken by the Board or its Committees, all care must be taken to ensure that civil or criminal proceedings are not unnecessarily initiated against the IDs or the NEDs unless sufficient evidence exists to the contrary.
Click here to read the Notification.
