The Ministry of Corporate Affairs (MCA) has issued a Standard Operating Procedure regarding prosecution filed or internal adjudication proceedings initiated against Independent Directors, non-promoters and non-KMP, non-executive directors. These clarifications include:
a) Independent Directors nominated by the Government on the public sector undertakings;
b) Directors nominated by Public Sector Financial Institutions, Financial Institutions or Banks having participation in the equity of a company, or otherwise;
c) Directors appointed in pursuance to any statutory or regulatory requirement such as Independent directors appointed by the NCLT.
Ordinarily, a whole-time director [WTD] and key managerial personnel [KMP] are associated with the day-to-day functioning of the company and accordingly such WTDs and KMPs would be liable for defaults committed by a company. In absence of a KMP, such director or directors who have expressly given their consent for incurring liability in terms of the e-form GNL-3 filed with the Registrar would be liable. Where the consent for incurring liability for any of the provisions dealing with maintenance, filing or distribution of accounts or records is submitted in e-form GNL-3 by a person under the immediate authority of the Board or any KMP, the liability of such person will arise. However, in certain cases, the penal provisions 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, or officer, or person, as the case may be, such as disclosure of interest by directors under section 184 of the Act.
All Registrars are directed to immediately and scrupulously follow the above mentioned Standard Operating Procedure with respect to all ongoing cases. Further, with respect to cases where prosecution may have been already filed but the criteria of the above-mentioned case are not satisfied, the same may be submitted to this Ministry for necessary examination and further direction thereon.
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