Corporate affairs minister Prem Chand Gupta has said independent directors on a company board would have difficulty escaping liability for any negligence by the company management as the present Company’s Act of 1956 does not define their status. Speaking at The Express Group’s Idea Exchange programme, Gupta however assured that troubles of the sort that had hit investment banker Nimesh Kampani would be sorted out once the amended bill was passed by Parliament. The bill is with the standing committee on finance and Gupta hoped it would be cleared despite the possible short spell of the budget session of Parliament.

JM Financial’s chairman Nimesh Kampani has been served a notice by the Hyderabad Police for an alleged default by the Nagarjuna Finance in returning money to depositors — a case which happened ten years ago. Kampani had served as independent director in the company till April 1999. Gupta acknowledged that this was a problem that could haunt independent directors on any company board appointed under the present act.

“It’s a very complex issue and the time has come to think it over,” said Gupta. He said the Company Bill defined a new category called key management personnel. “It will include executive directors, chief financial officer and company secretary. Other directors will not be held responsible unless their involvement is proved beyond doubt by the government,” he added.

Illustrating his point, Gupta said that in the current case the onus lay on Kampani to prove his innocence while once the new Companies Bill becomes an Act, directors would only be charged if there’s any specific evidence against them, meaning the onus would lie on the investigating authorities.

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