Gargi 25 December 2020

Directors responsibility for company's past contract

Dear Sir, We have filed suit against one of our vendor which is a private limited Company and upon it's Directors . When we had entered in to MOU , this Company has 2 Directors at that time , this vendor fails to comply with his obligations mentioned in the MOU, at present one of the Director is physically unfit and other one left the Country. For functioning purpose both these directors inducted one more Director . We have made new Director one of the defendant to the suit. Now he has filed application for deletion of his name. Now my query is can Director withdraw his name from the suit filed upon company on account of he being not Director but only employee of the Company when transaction took place.

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Quick Summary

This discussion explores director liability for a company's past contractual obligations, specifically concerning a private limited company and its directors. The core issue is whether a director, inducted after an MOU was signed and who has since left the company, can be held liable or remain a defendant in a lawsuit. The consensus suggests that a director inducted after the transaction's execution generally cannot be made a party to the suit, and their application for deletion should be allowed. However, directors who served during the tenure of the contract may still be liable, irrespective of their current status or health, and this is often decided on a case-by-case basis.

5 Replies

Pradipta Nath (Advocate) 25 December 2020

Haven't you made party to the Company? On the other hand irrespective of resignation, a Director cannot claim immune for the acts done during his tenure. This issue has to be decided on case to case basis.

Gargi 26 December 2020

Thank You Sir.

Regards,

Gargi

P. Venu (Advocate) 27 December 2020

As a general rule, the Company alone need to be the defendant unless there are special circumstances which renders the particular director liable.

Dr J C Vashista (Advocate) 28 December 2020

How can a person / director be impleaded as defendant, who was inducted after execution of a MoU ?

Answer is big No. The application of new director for deletion of his name from array of parties shall be allowed.

However, earlier partner, who is stated to have left for abroad, shall be a necessary party, irrespective of his health issue.

It is better to consult and engage another local prudent lawyer for better appreciation of facts/ documents, professional advise and necessary proceeding if you have lost faith in your lawyer.