Governing Without Control: Structural Misalignment In Independent Director Liability
Dr. Anuradha Dhadge-Girme Assistant Professor, Department of Law, New Law College, Bharati Vidyapeeth (Deemed to be University), Pune, Maharashtra, India.
Adv. CS Hrucha M. Dhamdhere, LL.M., Department of Law, New Law College, Bharati Vidyapeeth (Deemed to be University), Pune, Maharashtra, India.
ABSTRACT
Independent directorship was incorporated under the Companies Act, 2013 with an intent to strengthen board oversight, accountability and investor confidence. The liability that devolves on independent directors reflects a contrast between formal accountability expectations and the practical constraints of informational dependence and limited supervisory control. This paper examines whether liability can be meaningfully imposed where oversight responsibilities are structurally constrained. The paper adopts a doctrinal methodology grounded in statutory interpretation, judicial analysis and corporate governance theory. It argues that principal difficulty lies not merely in the breadth of liability exposure, but in governance imbalance between accountability obligations, access to information and decision-making authority.
The research advances an Accountability-Access-Control Misalignment Model to explain how liability may become distorted when legal expectations exceed the institutional conditions necessary for their discharge. Unlike conventional accounts that treat independent director liability primarily as a problem of excessive exposure, this model frames it as a problem of institutional design. The paper also argues that although Section 149(12) is meant to limit the scope of independent directors’ liability, the recent judicial and regulatory trends may dilute this protection. This can create uncertainty, encourage over-cautious behaviour, and push boards towards compliance-oriented formalism. The core issue, therefore, is not liability per se, but the design of liability within the governance framework. The article contributes to scholarship by reconceptualising independent director liability as a question of governance framework and not merely fault attribution. It proposes reforms through clearer liability thresholds, stronger informational rights, and more functional safe harbour protections to align independent directorship with its intended governance role.
Keywords: Independent Directors, Corporate Governance, Companies Act, 2013, Fiduciary Duties, Information Asymmetry, Liability Design
