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Liabilities of a Director under Companies Act 2013

Section 188. Related party transactions. –

This section provides that no company shall enter into a contract or transaction with a related
party commonly known as ‘related party transaction’ without the approval of Board of
Directors through a resolution passed in the Board meeting.

As per Section 188(5) any director or any other employee of a company, who had entered
into or authorised the contract or arrangement in violation of the provisions of this section
shall, -

(i) in case of listed company, be punishable with imprisonment for a term which may extend
to one year or with fine which shall not be less than twenty-five thousand rupees but which
may extend to five lakh rupees, or with both; and

(ii) in case of any other company, be punishable with fine which shall not be less than
twenty-five thousand rupees but which may extend to five lakh rupees.

(c) provides an explanation which is false or which he knows to be false, he shall be

punishable for fraud in the manner as provided in section 447.

Section 447. Punishment for fraud. –

This section provides that any person who is found to be guilty of fraud, shall be punishable
with imprisonment for a term which shall not be less than six months but which may extend
to ten years and shall also be liable to fine which shall not be less than the amount involved in
the fraud, but which may extend to three times the amount involved in the fraud. This section
further provides that where the fraud in question involves public interest, the term of
imprisonment shall not be less than three years.

Section 448. Punishment for false statement. –

This section provides that if in any return, report, certificate, financial statement, prospectus,
statement or other document required by, or for, the purposes of any of the provisions of this
Act or the rules made thereunder, any person makes a statement, -

(a) which is false in any material particulars, knowing it to be false; or

(b) which omits any material fact, knowing it to be material, he shall be liable under section
447.

Section 452. Punishment for wrongful withholding of property. –

This section provides that if any officer or employee of a company –

(a) wrongfully obtains possession of any property, including cash of the company; or
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(b) having any such property including cash in his possession, wrongfully withholds it or
knowingly applies it for the purposes other than those expressed or directed in the articles and
authorised by this Act, he shall, on the complaint of the company or of any member or
creditor or contributory thereof, be punishable with fine which shall not be less than one lakh
rupees but which may extend to five lakh rupees.

The Court trying such an offence may also order such officer or employee to deliver up or
refund, within a time to be fixed by it, any such property or cash wrongfully obtained or
wrongfully withheld or knowingly misapplied, the benefits that have been derived from such
property or cash or in default, to undergo imprisonment for a term which may extend to two
years.

Duties of a Director as per Companies Act 2013

Section 166 of the Act provides the following duties of a director –

(1) A director of a company shall act in accordance with the articles of the company.

(2) A director of a company shall act in good faith in order to promote the objects of the
company for the benefit of its members as a whole, and in the best interests of the company,
its employees, the shareholders, the community and for the protection of environment.

(3) A director of a company shall exercise his duties with due and reasonable care, skill and
diligence and shall exercise independent judgment.

(4) A director of a company shall not involve in a situation in which he may have a direct or
indirect interest that conflicts, or possibly may conflict, with the interest of the company.

(5) A director of a company shall not achieve or attempt to achieve any undue gain or
advantage either to himself or to his relatives, partners, or associates and if such director is
found guilty of making any undue gain, he shall be liable to pay an amount equal to that gain
to the company.

(6) A director of a company shall not assign his office and any assignment so made shall be
void.

(7) If a director of the company contravenes the provisions of this section such director shall
be punishable with fine which shall not be less than one lakh rupees but which may extend to
five lakh rupees.