Directors occupy a fiduciary and statutory position under the Companies Act, 2013. Their obligations arise from statute, common law fiduciary principles, the company’s constitutional documents, and sectoral regulations (e.g., SEBI for listed entities). Below is a structured, doctrinal explanation.

I. Statutory Duties of Directors

Fiduciary Duties (Section 166)

Section 166 codifies core fiduciary obligations:

• Act in accordance with the Articles of Association
• Act in good faith to promote the objects of the company
• Exercise due and reasonable care, skill, and diligence
• Avoid conflicts of interest
• Not achieve undue gain or advantage
• Not assign office

Breach may result in:

• Fine (₹1 lakh to ₹5 lakh)
• Civil consequences (disgorgement, damages)

This section aligns Indian law with global corporate governance standards.

Duty of Care, Skill and Diligence

Indian courts apply:

• An objective standard (reasonable director test)
• Plus a subjective element (special knowledge of the director)

Failure may attract:

• Negligence liability
• Oppression/mismanagement proceedings
• Personal liability in insolvency

Disclosure of Interest (Section 184)

A director must disclose any direct/indirect interest in:

• Contracts
• Arrangements

Non-disclosure can lead to:

• Vacation of office
• Penalty
• Contract voidability

Independent Directors’ Duties (Schedule IV)

Independent directors must:

• Safeguard minority shareholders
• Evaluate board performance
• Oversee financial integrity

Their liability is limited to acts:

• With knowledge
• With consent
• Without due diligence

II. Civil Liabilities of Directors

Directors may be personally liable in the following situations:

Breach of Fiduciary Duty

The company can sue for:

• Damages
• Recovery of undue gain

Misstatement in Prospectus (Section 35)

Liability for:

• Untrue statements
• Omission of material facts

Oppression and Mismanagement (Sections 241–242)

Tribunal may:

• Remove directors
• Impose restrictions

Adjudicated before the National Company Law Tribunal.

III. Criminal Liability

Directors may face criminal consequences where the statute explicitly provides.

Examples:

• Fraud (Section 447)
• False statements (Section 448)
• Non-maintenance of books
• Non-filing of returns

Punishment may include:

• Imprisonment
• Heavy fines

Criminal liability generally applies to:

• “Officer in default”
• Directors who were in charge and responsible

IV. Vicarious Liability

Indian company law does not automatically impose vicarious criminal liability.

Courts require:

• Specific role
• Active participation
• Mens rea (in fraud cases)

Landmark judicial interpretation was discussed in:
Sunil Bharti Mittal v. CBI
The Supreme Court clarified that directors cannot be mechanically prosecuted without specific allegations.

V. Liability in Insolvency

Under the Insolvency and Bankruptcy Code, 2016:

Directors may be liable for:

• Fraudulent trading
• Wrongful trading
• Preferential transactions

The resolution professional can apply to NCLT for action.

VI. Key Judicial Principles

Indian courts have consistently held that:

• Directors are trustees of company property.
• Liability depends on participation and knowledge.
• Non-executive directors are not automatically liable.

Important case:
Official Liquidator v. P.A. Tendolkar
The Court emphasized that directors must exercise reasonable supervision.

VII. Defences Available to Directors

Directors may avoid liability by showing:

• Due diligence exercised
• No knowledge of wrongdoing
• Reliance on expert advice
• Proper disclosure made
• Dissent recorded in minutes

VIII. Practical Risk Areas in India

High-risk compliance zones include:

• Related party transactions
• CSR compliance
• Financial statement approval
• SEBI disclosure obligations (for listed companies)
• Tax defaults
• ESG disclosures (emerging area)

IX. Summary Table

To learn about the topic in detail, you may refer to this resource.