Nominee directors not liable for scheme non-adherence. Emphasizes active involvement.

The court set aside the order holding nominee directors liable for non-adherence to the Export Promotion Capital Goods Scheme, emphasizing the directors' need for active involvement in the offense during their tenure. It clarified nominee directors' responsibilities under the Companies Act and MCA Circulars, noting their role in overseeing financial obligations rather than past statutory violations. The judgment highlighted the importance of establishing a direct link between a director's actions and the offense, ultimately ruling that the liability of the petitioners in this case was unjustified given the circumstances.

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Issues:
1. Liability of nominee/independent directors for non-adherence to the terms and conditions of the Export Promotion Capital Goods Scheme (EPCG Scheme).
2. Interpretation of Sections 140 of the Customs Act, 1962, and 2(13) of the Companies Act, 1956 regarding the liability of directors.
3. Examination of the role and responsibilities of nominee directors under the Companies Act, 1956 and 2013.
4. Application of Circulars issued by the Ministry of Corporate Affairs (MCA) in determining the liability of directors.
5. Consideration of the appointment of nominee directors by banks to oversee financial obligations and their liability in statutory violations.
6. Justification for implicating nominee directors for alleged non-compliance with EPCG license terms issued prior to their appointment.

Analysis:
The judgment involves writ petitions filed by bank employees against an order passed concerning an entity that failed to meet export obligations under the EPCG Scheme. The petitioners, appointed as nominee directors by a consortium of banks for corporate debt restructuring, were held liable for non-adherence to the EPCG Scheme's conditions. The court examined the liability of nominee directors under Sections 140 of the Customs Act and 2(13) of the Companies Act, emphasizing the need for active involvement in the offense at the time it occurred.

The court analyzed the roles of nominee directors under the Companies Act, 1956 and 2013, highlighting the specific responsibilities and liabilities associated with their positions. It referenced Circulars issued by the MCA, emphasizing the importance of verifying a director's role in an offense before initiating penal action, and distinguishing between acts of omission and commission with or without the director's knowledge or consent.

Regarding the appointment of nominee directors by banks to oversee financial obligations, the court considered the specific mandate and focused responsibilities of such directors. It noted that expecting these directors to oversee obligations that arose prior to their appointment would be unjustified, especially when their primary role was to monitor financial aspects rather than compliance with export obligations.

Ultimately, the court found merit in the petitioners' arguments and set aside the impugned order, indicating that the liability of the present petitioners as nominee directors was unwarranted given the circumstances. The judgment clarified the distinction between statutory violations that occurred during a director's tenure and those that predated their appointment, emphasizing the need for a clear connection between the director's actions and the offense in question.

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