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Non-Executive Independent Directors Not Liable for Day-to-Day Activities of a Company

posted 2 years ago

Meena Anand Suryadutt Bhatt vs Union of India and Jt. Director General of Foreign Trade

In the present case, the adjudication order of Jt. Director General of Foreign Trade (“DGFT”) against TPI India Limited (“Company”) and its directors was challenged in Bombay High Court (“Court”). The order was passed in relation to violation of export obligation under advance import license issued to the Company.  

DGFT issued adjudication imposing a penalty of INR 50,86,000/- on the Company and all its directors including the non- executive independent director. DGFT argued that even after the non-executive independent director resigned from the Company, his name appeared in import export code as director and therefore penalty was imposed on him.

The Hon’ble Court held that the Company is solely responsible for failing to comply with the requirements of the advance import licence and not the non-executive independent director. Further, DGFT should have made proper inquiry in the office of Registrar of Companies to establish the name and address of the directors and sent separate notices to each. In addition, the active role of each director should have been assessed which led to the default in fulfilling the export obligation.

Disclaimer: This publication is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to herein. This publication has been prepared for information purposes only and should not be construed as a legal advice. Although reasonable care has been taken to ensure that the information in this publication is true and accurate, such information is provided ‘as is’, without any warranty, express or implied, as to the accuracy or completeness of any such information.

For further information on this topic please contact Ms Neetika Ahuja, Partner at Clasis Law by email ([email protected]).

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