Criminal Liability Of Directors In Corporate Offences
- IJLLR Journal
- May 31
- 2 min read
Nurien Sheoran, O.P. Jindal Global Law School
Introduction
At the intersection of corporate law, criminal law and regulatory enforcement lies the criminal liability of directors for corporate offences . While a company is seen as a separate legal entity ,which is capable of committing statutory violations, corporate decision-making is ultimately exercised through human agency. Hence the important question is under what circumstances the criminal responsibility may be extended to directors and officers who were in charge of or exercised control over the company’s affairs.
A general principle criminal law is that it is founded on personal culpability and does not ordinarily recognise vicarious liability. Such a liability only arises when a statute expressly says or suggests so. The Supreme Court of India has consistently cautioned against integrating civil law notions of collective responsibility into criminal law without clear legislative sanction. Regulatory statutes such as the SEBI Act incorporate limited provisions for vicarious liability thus acknowledging the realities of corporate functioning while subjecting such liability to strict statutory conditions.
The doctrine of separate legal personality established via Salomon v. Salomon & Co. Ltd. forms the doctrinal foundation of this inquiry. Upon incorporation a company becomes a separate legal entity and is thus liability for corporate acts that ordinarily rests with the company itself rather than its directors. While courts have developed the doctrine of lifting the corporate veil to prevent misuse of the corporate form especially in cases of fraud or abuse attribution of criminal liability in the regulatory context does not primarily rest on judicial veil- piercing. Instead the veil has been statutorily via provisions such as Section 27 of the SEBI Act and Section 141 of the Negotiable Instruments Act which create narrow exceptions permitting liability to attach to individuals who exercised control over corporate affairs at the relevant time.
