In this note: How to assess the role attributed to each director in an EOW chargesheet, distinguish allegations of personal conduct from naming based solely on office, and present that distinction to the court.
The first thing to read in an Economic Offences Wing (EOW) chargesheet is not the list of sections invoked. It is the paragraph that sets out what each accused is alleged to have done. The report may run to several volumes and thousands of pages, yet it is those few lines, read side by side, that show the structure of the case.
What does the role paragraph show?
For promoters and operational personnel, the report commonly records particulars such as accounts controlled, decisions taken, representations made to purchasers, funds received or diverted, directions issued, and witnesses who identify the person concerned. Managing and whole-time directors, persons controlling or operating the company’s bank accounts, those in charge of finance, and those who dealt directly with purchasers may fall within that description, whether or not they sat on the board. For certain independent or non-executive directors, however, the role paragraph may be materially different. It may be confined to a formula: he was a director between stated dates; during that period, money was collected from purchasers, and the project was not completed.
In some reports, substantially the same formula appears even for directors who have died.
That contrast matters. It does not, by itself, establish that the prosecution is unsustainable. It does, however, expose the question that must be answered before a person is sent to trial: what material fact connects that individual to the alleged offence?
The answer can take many forms, depending on the offence. It may be an act done, an instruction given, an approval granted, or an agreement to bring about the unlawful result. It may be control over the transaction in question, or the use of an authority that the person alone held. It may, where the law makes the omission material, be a dishonest failure to act. Whatever form it takes, the material must connect the individual to the alleged offence in a way that satisfies its essential ingredients, including any dishonest intention, knowledge or agreement that the offence requires.
A directorship is a legal status. It is not, without more, an act of cheating, criminal breach of trust, conspiracy, dishonest inducement, diversion of funds, or participation in the affairs from which the alleged offence arose. Where the report identifies specific conduct against those said to have run the company but identifies no corresponding conduct against an independent or non-executive director, the omission is not peripheral. It goes to the foundation of the prosecution against that person.
The converse is equally true. An executive designation does not, by itself, establish the offence either. What matters is the conduct, authority, knowledge, and intent that the record attributes to the individual, not the title the record gives him.
What the law requires
Whether the IPC or the BNS applies generally depends on when the conduct took place: the IPC for conduct before 1 July 2024, and the BNS for conduct on or after that date. The ordinary penal law does not create a general rule by which every director becomes criminally liable for acts of the company merely by reason of office. A special statute may expressly create vicarious liability, and a director may of course be prosecuted where the material shows personal participation, consent, connivance, control over the relevant transaction, or other conduct constituting the alleged offence. But, absent such a statutory basis, Sunil Bharti Mittal v. CBI, (2015) 4 SCC 609, requires material demonstrating an active role in the alleged offence, coupled with the requisite criminal intent.
Is board attendance enough?
The principle is not displaced merely because a director attended board meetings. In K.S. Mehta v. M/s Morgan Securities and Credits Pvt. Ltd., 2025 INSC 315, (2025) 7 SCC 615, decided in the context of Section 141 of the Negotiable Instruments Act, 1881, the Supreme Court held that attendance at board meetings, without more, does not establish control over a company’s financial operations or attract vicarious liability. The complaint must contain specific averments and material showing that the director was in charge of, and responsible for, the company’s business in relation to the relevant transaction.
The appellants in that case had not attended the board meeting that approved the underlying transaction. The Court also relied on the company’s corporate governance reports and Registrar of Companies records, which confirmed that they were non-executive directors. The decision does not govern an EOW investigation under the Indian Penal Code, 1860 (IPC), the Bharatiya Nyaya Sanhita, 2023 (BNS), or other general penal provisions. Its reasoning is nevertheless instructive: general board participation cannot substitute for pleaded and supported responsibility in relation to the transaction said to give rise to the offence.
Companies Act safeguards
The Ministry of Corporate Affairs has adopted a similarly cautious administrative approach in proceedings under the Companies Act, 2013. Its General Circular No. 1/2020 dated 2 March 2020 is addressed to Regional Directors, Registrars of Companies and Official Liquidators. It says that independent directors and non-executive directors who are not promoters or key managerial personnel (KMP) should not be arrayed in civil or criminal proceedings under the Act unless the section 149(12) criteria are met. Those criteria are that the act occurred with his knowledge, attributable through Board processes, and with his consent or connivance, or where he had not acted diligently. It applies to ongoing cases, and where a prosecution has already been filed but the criteria are not satisfied, the matter may be submitted to the Ministry for examination and further direction.
The circular does not bind the police in an IPC or BNS investigation. Nor does Section 149(12) confer immunity from general penal law where independent material establishes knowing participation, consent, connivance, or culpable conduct. It nevertheless illustrates a sound distinction: a person’s position on the board is not a substitute for material showing responsibility for, knowledge of, or complicity in the alleged contravention.
The notice stage
Timing is critical. Once a notice under Section 35(3) of the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS) is issued, it gives a practical opportunity to place the person’s position and supporting documents before the investigating officer while the investigation remains open, and to ask that they be considered and placed on record. It does not guarantee exclusion from the final report. But it is the stage at which resignation records, board resolutions, role descriptions, correspondence, banking-authority records, and material demonstrating the absence of operational control can be brought into the investigation and, where appropriate, reflected in the police papers.
The representation should do more than state that the person was an independent or non-executive director. It should invite verification of whether the material discloses any of the following:
- Control over the relevant bank accounts
- Receipt or use of funds
- Authority in relation to the alleged transaction
- Participation in representations to purchasers
- Approval of the alleged diversion
- Operational instructions issued
- Communications evidencing knowledge of and participation in the alleged wrongdoing
That matters because the ordinary discharge inquiry is substantially record-bound. Under State of Orissa v. Debendra Nath Padhi, (2005) 1 SCC 568, the court at the stage of charge ordinarily considers the prosecution record and documents submitted with it, rather than undertaking an evaluation of defence material produced for the first time. A resignation letter that has been investigated and forms part of the police record is therefore materially different from one produced only after the filing of the police report.
Can a director seek discharge after the police report?
After the police report, the procedural route depends upon the nature of the case and the court before which the matter proceeds. In a warrant case instituted on a police report before a Magistrate, the applicable discharge provision is Section 262 BNSS. If the matter is before a Court of Session, discharge is sought under Section 250 BNSS. The High Court’s inherent jurisdiction is preserved by Section 528 BNSS.
The argument in either forum need not be that the police record is factually false. The sharper submission is that the prosecution’s own record, read at its highest, attributes no conduct to the accused beyond the fact that he held office during a stated period. The assessment is made against the ingredients of the offence and the record as a whole, so a sparse role paragraph does not by itself guarantee discharge.
Where the role paragraph says only that he was a director when purchasers paid money and the project remained incomplete, it may describe a chronology of corporate events. But it does not, without more, describe a representation made by him, a decision taken by him, a transaction authorised by him, funds controlled or diverted by him, an agreement to commit an unlawful act, or other material from which dishonest intention or knowing participation can reasonably be inferred.
Office may explain why a person was investigated. It cannot, without further material, explain why that person should stand trial.
Image credit: illustrative image generated with AI.
General information only, not legal advice. Reading this note creates no advocate-client relationship, and no responsibility is accepted for action taken in reliance on it. The law changes and outcomes depend on the facts, so please take specific advice before acting. See the Disclaimer.