Respected sir, In case of any criminal negligence ( like fire , lift accident , wall collapse etc ) at a work place like hospital/ restaurant / factory/ schools owned by a private limited company ( or LLP ) with multiple branches. Whom shall government or inspectors prosecute ? Managers or directors ? What should be done so that directors can be saved from criminal prosecution as negligence is always caused by managers . Is there any such agreement possible where its clearly defined that managers would be responsible for such negligence. What are other steps taken ? Please guide.
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1. The management which failed in its duty to take adequate care is liable to be prosecuted for causing death due to negligence. The liability of directors and management is joint and several.
2. If the directors are also arrayed as accused persons then the only way they can save themselves is by leading evidence to show that they were not directly in charge of the security apparatus of the institution.
3. An agreement of the nature that you have conceived does not come to rescue in the court.
1. In the event of crime both the Directors responsible for ,managing day to day business and the manager are both liable to be prosecuted.
2. Directors will have to show that they took enough precaution but Manager did not adhere to it. But since it is very hard to prove hence Directors are also held liable.
3. Yes, agreement can be drafted in such manner whereby the liability of Directors in event of crime can be limited.
as long as the Directors Act within their powers, and exercise their duty with reasonable care and skill as every prudent businessman is expected to take care of, they will not be made liable. But where they fail to exercise reasonable care, skill and diligence, they shall be deemed to have acted negligently in discharge of their duties and consequently shall be liable for any loss or damage resulting therefrom.
2) since a company is a legal abstraction without a real mind of its own, it is those who in fact control and determine the management of the company, that are held vicariously liable for commission of statutory offences by the company. The directors of the company are, therefore, called upon to answer the charge, being the directing mind of the company. This was held by the Supreme Court of India in the case of J. K. Industries Ltd. & Ors. v. Chief Inspector of Factories and Boilers & Ors., [1997] 88 Comp Cas 285 (SC) w
1) under the Factories Act, 1948, in respect of factory of a company only a director can be “occupier” (i.e. the person who has ultimate control over the affairs of the factory) as set forth in Section 2(n) of the Factories Act (J. K. Industries Ltd. & Ors. v. Chief Inspector of Factories and Boilers & Ors., [1997] 88 Comp Cas 285 (SC)).
2) A director nominated as “occupier” of the factory of a company will be responsible for liabilities attached to an “occupier” under the Factories Act. under Section 92 of the Factories Act, there is general penalty for offences, inter alia, providing that if in or in respect of any factory there is any contravention of any of the provisions of the Factories Act or rules made thereunder or of any order in writing given thereunder, the occupier and manager of the factory shall each be guilty of an offence and punishable with imprisonment for a term which may extend to 2 years or with fine which may extend to Rs. 1 lakh or with both.
The liability in such cases will be on the owners/proprietors/directors.
The managers or other staffs, if directly involved can also be held responsible, but the directors responsibility cannot be ignored.
No agreement to this effect can save the directors.
This will be considered as an accidental death (if fatal), however the company on behalf of the directors shall pay the compensation if ordered so by the court.
Directors are agents of the Company in transactions they enter into on behalf of the Company.
Director’s liability arises because of their position as agents or officers of the Company as also for being in the position of trustees or having fiduciary relation with the Company .
Some of these liabilities are in contract, some are in tort, some are under the criminal law and others are statutory, i.e., under the Companies Act, 1956 and other laws. The courts have, in deciding the liability of Directors, taken into consideration a director’s position as a whole.
As far as fiduciary duties/obligations are concerned, any breach by any director would visit them with liability.
"A director has to act in the way in which a man of affairs dealing with his own affairs with reasonable care, and circumspection could reasonably be expected to act.
Therefore, Directors would decidedly be liable for omitting to do what they could have done in the circumstances.
Directors as such are not liable for the torts or civil wrongs of their company. To make a person liable for a tort, e.g. for negligence, trespass, nuisance or defamation it must be shown that he was himself the wrongdoer or that he was the employer or principal of the wrongdoer in relation to the act complained of, or that the tort was committed on his instructions.
