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.

"This issue of Kampani is related to a non-banking finance company (NBFC), which is regulated by RBI. Moreover the provisions of the Andhra Pradesh Deposit Taking Companies Act have been invoked. The present Companies Act does not distinguish between independent directors and other directors. So Kampani's problems is a multifarious one," Gupta said. “People depositing money in an NBFC or in a company see the name of the celebrities, even film stars and cricketers and they think that nothing can go wrong with such companies. An independent director has to have integrity, reputation and no direct or indirect vested interest in the company's affairs,” he added.