MCA vide Circular No. 01/2020 dated 02nd March, 2020 has issued the following Standard Operating Procedure (SOP) to all Registrars with respect to prosecutions or internal adjudication proceedings against Independent Directors (IDs), non-promoters and non-KMP non-executive directors (NEDs).


The Ministry has specifically laid emphasis that civil or criminal proceedings should not be unnecessarily initiated against the IDs or the NEDs, unless sufficient evidence exists to the contrary.

Independent Director

Officer in default u/s 2(60) Companies Act, 2013

Officer who is in default, for the purpose of any provision in this Act which enacts that an officer of the company who is in default shall be liable to any penalty or punishment by way of imprisonment, fine or otherwise, means any of the following officers of a company, namely:—

(i) whole-time director;

(ii) key managerial personnel;

(iii) where there is no key managerial personnel, such director or directors as specified by the Board in this behalf and who has or have given his or their consent in writing to the Board to such specification, or all the directors, if no director is so specified;

(iv) any person who, under the immediate authority of the Board or any key managerial personnel, is charged with any responsibility including maintenance, filing or distribution of accounts or records, authorizes, actively participates in, knowingly permits, or knowingly fails to take active steps to prevent, any default;

(v) any person in accordance with whose advice, directions or instructions the Board of Directors of the company is accustomed to act, other than a person who gives advice to the Board in a professional capacity;

(vi) every director, in respect of a contravention of any of the provisions of this Act, who is aware of such contravention by virtue of the receipt by him of any proceedings of the Board or participation in such proceedings without objecting to the same, or where such contravention had taken place with his consent or connivance;

(vii) in respect of the issue or transfer of any shares of a company, the share transfer agents, registrars and merchant bankers to the issue or transfer;

Liability of an Independent Director/ Non-Executive Director not being Promoter or Key Managerial Personnel u/s 149(12) Companies Act, 2013.

Notwithstanding anything contained in this Act,—

(i) an independent director;

(ii) a non-executive director not being promoter or key managerial personnel, shall be held liable, only in respect of such acts of omission or commission by a company which had occurred with his knowledge, attributable through Board processes, and with his consent or connivance or where he had not acted diligently.

Key takeaways of the said circular:

  • Nature of Default shall be critically examined before prosecuting officers of the company for defaults committed under the Act.
  • Registrar may seek necessary documents at the time of serving notices to the company as to ascertain the involvement of the concerned officers of the company, all care must be ascertained to ensure that no unnecessary proceeding has been initiated against IDs or NEDs
  • All records available with the ministry including e-forms DIR-11 or DIR-12 shall be crucially examined so as to ensure that whether the particular director or KMP was associated with the company as on the date of default.
  • In case of any doubts, with regards to the liability of any person regarding any proceeding, the Registrar may seek guidance from MCA through the office of Director General of Corporate Affairs. Consequently, such proceedings must be initiated after receiving due sanction from MCA.
  • With respect to cases where prosecution may have been already filed but the above mentioned criteria is not satisfied, the same may be submitted to Ministry for necessary examination and further direction thereon.


We at JS&A provide one stop solution as a consultancy and compliance firm providing Corporate and Secretarial Services.

You can get in touch with our Compliance Manager/Associate at any point of time and get assistance on matters related to compliances of Directors and/or KMP of the Company.

For further details you can contact us at [email protected] or call us at 9757113889.


Disclaimer: Absolute Care is taken to prepare this article however inadvertently if any errors occurs then the Author shall not be held responsible for any such cause. The Content published is only for educational purpose and shall not be construed as rendering of any Professional Advice in any manner whatsoever. The Readers must exercise their own Judgement and refer the original source before any implementation. Further the content is an original work of the author and may be used only after written permission.

Authors: Mehul Solanki and Neha Vaishya

Mehul Solanki And Neha Vaishya

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May 2021