The liability of Independent Directors in the case of non-compliance/fraud/failure can fixed, if they didn’t do their job as expected as per the provisions of the Companies Act, 2013 and other statutory provisions. Recently, SEBI passed an order against a reputed listed company and some of its promoters debarring them alleging that accounting misstatements were made to significantly overstate turnover and profits and also levied penalties on directors and officials of this company on grounds that they failed in their duties. The reasons given by SEBI in finding independent directors guilty have concerns across the industry with far-reaching academic and practical relevance. Does the law really hold independent directors responsible at high level and detail? 

To summarise, the allegations in the SEBI rulings, taking them at face value, were as follows. That the listed company booked wrongfully/prematurely booked sales/profits by entering into MOUs with a ‘group’ entity. That the company engaged in a concerted attempt to carry out such acts, and the independent directors/audit committee did not exercise proper diligence in respect of such transactions.

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