New Delhi: There is an urgent need to include a non-obstante clause in the Companies Act 2013 to exclude the independent directors from criminal liability for offenses committed by the company, said the industry body PHD Chambers of Commerce and Industry.
Mr. Sanjay Aggarwal, President, PHD Chambers of Commerce and Industry stated that independent directors are not involved in the day to day management of the company, so it is totally unfair to include them in criminal proceedings done by the institution they represent.
Independent directors play an important role in incorporating the principles of corporate governance in any company. They are instrumental in getting accountability and transparency in the system. Many a time they act as a bridge between the company management and the various small shareholders by bringing independent judgment in various workings of the company, said Mr Sanjay Aggarwal.
According to Mr Aggarwal, a trusted independent director brings a clear perspective and helps the management in making informed decisions making. By reducing and safeguarding the liabilities, the government would encourage more and more talented people to join company boards as independent directors.
The PHD Chamber of Commerce and Industry is of the view point that the liability of the independent directors should be limited to the extent of the involvement by them in defaults or evasions done by the management with the consent or the knowledge of the independent director.
The PHD Chamber believes that instead of imprisonment or attaching of personal properties of the independent directors, the liability should be restricted to penalties and fines, said Mr Aggarwal.
Mr Aggarwal added that unless there is sufficient evidence to prove the independent directors’ direct involvement or establish his nexus with any criminal intent, his criminal liabilities needs to be exempted.
By decriminalizing the role of the independent director, the government should help in preserving the institution of independent directors, said Mr. Sanjay Aggarwal.