Criminal Liability of Directors and Senior Management of a Company – In A Minute
In the past few years, we have witnessed many cases, where the directors and senior management have been involved in criminal matters relating to the companies.
Do not miss this #InaMinute video on LawWiser, where Rajat Pradhan, Principal Associate at Phoenix Legal, throws light upon the heated topic – Criminal liability of directors and senior management of the company.
In this one-minute video Rajat shares a quick overview of the recent judgments passed by the Supreme Court of India on this issue. Stay tuned for more such videos from LawWiser.
With the increasing number of cases on the criminal liability of directors and the company’s senior management, it has become an interesting topic of discussion.
The fact that the liability of the directors in some cases can be civil as well makes it more critical for the authorities to deal with it. As stated earlier, recently there have been many cases where directors and senior management of the company have been alleged to be involved in acts attracting criminal liability.
Any such offence committed by a company in which the director was alleged to be involved will make the director liable for such criminal offences under the Companies Act. Often, these allegations are general and not about specific acts. This leads to the summoning of directors and senior management by the investigating authorities.
In Sunil Bharti Mittal v. CBI, the Supreme Court held that the officers of a company can be made accused, along with the company, if there is sufficient evidence of their role coupled with criminal intent. Alternatively, they can be made liable when the statute provides for vicarious liability. Statues such as the Environmental Protection Act and the Information Technology Act provide for vicarious liability which is rebuttable in nature.
On 27 September, the Supreme Court in Ravindranatha Bajpecase held that merely because a person is a Chairman or a Managing Director, they cannot be held vicariously liable unless there are specific allegations against them.
It can be concluded that the directors and senior management of the company have been under the court’s purview, and in coming times we will see many more landmark judgments on criminal liability.