Following the two-year jail sentence given to Mr Keshub Mahindra then chairman of Union Carbide India and others in the Bhopal gas case, the CII on Wednesday asked the government to insert a clause in the Companies Bill 2009 excluding independent directors from any criminal liability for offences committed by the company.
In a statement, CII president, Mr Hari Bhartia said that the government should treat non-executive members of the board including non-executive chairmen, differently when it comes to director’s liabilities. The CII said,
“While as board members, independent and non-executive directors have the same legal duties and obligations as executive directors, however, because of their limited involvement in the day-to-day running of the company, it is undesirable for the law to expose them to personal liability,” said CII.
However, experts and analysts are against any such move.
“CII recommendations should not be accepted as the company is an artificial entity and it is the directors who are responsible for the company,” said Mr Sanjay Parikh, senior Supreme Court lawyer. If people don’t want to be held responsible for the company then they should not hold the post of directors, he said.
Prime Database, managing director, Mr Prithvi Haldia said that first the government should define the independent director and their role and responsibility.
He said directors are accountable for all the decisions of the company and if they don’t want to be held accountable than a new category should be created that of advisors. “There is nothing like independent directors as all of them are known to the promoters. Scrap this concept of the independent directors and directors should be held responsible for all the misgiving or frauds in the company,” said Mr Haldia. According to him more than 1,000 independent directors have resigned since Satyam for the fear of getting into personal liability.
It said that non-executive directors cannot be made to undergo the ordeal of a trial for offence of non-compliance with a statutory provision unless it can be established prima facie that they were liable for the failure on part of the company.