Practicing professionals are prohibited from acting as full time directors
Bombay High Court in its recent judgement in the case of Rajendra Shah s/o. Ambalal Shah vs. State of Maharashtra on the issue of Liability of professionals acting as Non-executive directors has held that “Practicing professionals are prohibited from acting as full time directors”.
They can only act as non-executive directors not performing administrative duties. Such persons cannot be prosecuted for offenses committed by the company. it will be a travesty of justice to prosecute all Directors if the offense is committed without their knowledge.
The accounts are signed by such directors in a routine manner and they are not subject to vicarious liability (Homi Phiroz Ranina & Ors. vs. State of Maharashtra 2003 (3) Mh.L.J. 34 followed)
In Homi Phiroz Ranina & Ors. vs. State of Maharashtra & Ors., the complaint was filed for delay in remitting the tax deducted.
The applicant has taken stand that he was non- executive Director of the company and they are also practising advocates and, therefore, they are prohibited under the law to act as full time directors.
They could only act as non-executive directors not exercising administrative powers or peforming administrative duties.
It is held that unless the complaint discloses a prima facie case against the applicant/accused of their liability and obligation as principal officers in the day to day affairs of the company as Directors of the company, the applicants cannot be prosecuted for the offences committed by the company and held that it will be a travesty of justice to prosecute all the Directors if the offence is committed without their knowledge.