Directors not involved in day-to-day management cannot face securities liability for trading irregularities absent culpable participation.

Directors who were merely college-going and not involved in the company's day-to-day affairs could not be fastened with securities law liability for trading irregularities. The record accepted by the regulator showed that they had no role in the broker company's management, while control rested with the father. On that basis, the SAT rejected importing a broad theory of vicarious or strict liability against directors who were not shown to have conducted, consented to, or neglected the impugned acts. The penalty imposed on them was set aside.

---

---

Issues: Whether college-going directors who were not in charge of the company's day-to-day affairs could be fastened with liability under the securities law for the impugned trading irregularities.

Analysis: Liability could not be imposed merely because the appellants were directors. The material on record, as accepted by the regulatory authority itself, showed that they had no role in the day-to-day management of the broker company and that the father alone was in control. The Court held that the regulatory framework did not justify importing a broad theory of vicarious liability or strict liability against directors who were not shown to be responsible for the conduct of business or to have participated in, consented to, or neglected the impugned conduct. The accepted absence of involvement and the absence of any demonstrated culpable role meant that the appellants could not be treated as liable for the misconduct.

Conclusion: The appellants were not liable and the impugned order, insofar as it penalised them, was set aside.

---