A Director is placed in a fiduciary position to that of a company and, therefore, it is the duty of a Director to ensure that the assets of the company are preserved and protected.
Delhi High Court has recently held that a Director is placed in a fiduciary position to that of a company and, therefore, it is the duty of a Director to ensure that the assets of the company are preserved and protected. It is the Director who ensures that the affairs of the company are conducted in a manner so as to comply with all laws and for the benefit of the company. Directors of the company are liable if the records of the company are not maintained as required by law or that the relevant books and papers of the company are not preserved. The Directors are liable in all such circumstances, where company suffers loss on account of not maintaining proper records or where there is a failure in taking appropriate steps for preserving and recovering the assets of the company. As has already been held by the Supreme Court, even if no specific act of dishonesty is proved against a Director personally, the Court could still nonetheless hold a Director liable for misfeasance if he was found to be closely associated with the management of the company. It is not necessary for a Director to have participated in commission of a fraud. It is enough to show that the Director was negligent which enabled the fraud to be committed. Whether filing of Form No. 32 or acceptance of resignation submitted by a Director is necessary for the same to be effective Unless otherwise specified in the Articles of Association of a company, a resignation by a Director would become effective from the date on which it is communicated. A resigning Director is not obliged to file Form No. 32 with the Registrar of Companies. A resignation by a director implies a relinquishment of his office. This is a unilateral Act which unless the Articles of Association otherwise provide, is not contingent on the acceptance by the company. Directors act as agents of the company and hence entitled to terminate their agency. The act of resignation or relinquishment of the office would not require the consent of the company. Therefore the same will become effective from the time when the intention to relinquish the office as a Director is communicated. By virtue of Section 303(2) of the Act a company is obliged to file a return in the prescribed form indicating any change among its directors. Filing of Form 32 is an obligation of the company and not of the Director who is demitting office. This is to be initiated after the resignation by a Director has become effective. Once a Director has demitted his office, he would have no authority to file any form on behalf of the company. In the instant case, on the relevant date, the Applicant-Director had already ceased to be the Director and he as ex-director was not liable. [Dr. J.S. Gambhir vs. Millennium Health Institute and Diagnostics Pvt. Ltd.] (Delhi HC, 11.02.2014)