Points Of Law : Provisions of sub-sections (8) and (12) of Section 149 of Companies Act 2013 and of Schedule IV which specifies Code for Independent Directors - Non-executive director not being promoter or key managerial personnel, shall be held liable, only in respect of such acts of omission or commission by a company which had occurred with his knowledge, attributable through Board processes, and with his consent or connivance or where he had not acted diligently.

ORDER

1. Admit.

2. The two appeals arise from a judgment of the National Company Law Appellate Tribunal ["NCLAT"] dated 4 March 2020 in Company Appeal (AT) Nos. 206 of 2019 and 285 of 2019.

3. The National Company Law Tribunal ["NCLT"] , by its order dated 18 July 2019, allowed an application seeking that the appellants should be impleaded, amongst other persons, in the course of its proceedings relating to IL&FS Limited. The NCLT and NCLAT directed that a number of persons be impleaded. Among them were both Executive and non-Executive Directors and the auditors of IL&FS.

4. Both the appellants were appointed as Independent Directors of IL&FS Financial Services Limited ["IFIN"] . Ms Neera Saggi, the appellant in the first of the two appeals before this Court was appointed as an Independent Director on 18 March 2015. She resigned from the position on 25 July 2016. Ms Renu Challu, the appellant in the companion appeal, was appointed as an Independent Director on 27 September 2017. She resigned on 17 September 2018.

5. The NCLT, while dealing with the question as to whether they should be impleaded, observed in paragraph 74 of its order that:

"74. With regard to proposed Respondent No. 336, Neera Saggi, SFIO has stated in its complaint before the Special Court at Mumbai that the independent Directors and CFO of the company are appointed with objective to help the company in improving corporate credibility and governance standard but they ignored all alarming indicators and failed to save the interest of the company and its stakeholders by not raising of these issues in the Board Meetings and remained mute spectator. It is revealed that in connivance with each other, the Independent Directors, Directors, CFO of the I FIN, group CFO abused their positions and used various modus operandi to continue lending from IFIN to group entities, by causing wrongful loss to IFIN & its stakeholders such as investors and creditors whose money it was misusing for fraudulent lending, which ultimately resulted in ultimate loss to the company, and its creditors. Investigation further revealed that the Audit Committee members and the Independent Directors, Director, CFO of the IFIN and group CFO of the IL & FS were aware of the stressed asset portfolio, the modus operandi used for granting loans to group companies of existing defaulting borrowers in order to prevent their being classified as NPA."

6. Having made the above observation, the NCLT, in paragraph 81 of its order, stated that:

"81. It is pertinent to mention that in 2nd SFIO Report, no role of Independent director has been specified. Therefore, their impleadment in the case is not justified, at this stage."

7. Ultimately, while drawing its final conclusions, the NCLT observed that:

"85. It is also important to point out that in the 2nd SFIO Report, no role of Independent director has been specified. It is observed from the record that even though Mr. Surinder Singh Kohli, Ms. Subhalakshmi Panse were the Independent Directors, they were also the part of Audit Committee of IFIN. We therefore, at this stage allow MA 2071/2019 and direct the petitioner to implead the names of Proposed additional Respondent Nos. 321 to 343 to the Company Petition No.3638/2018"

8. The above extracts would indicate that the NCLT noted that the second SFIO Report did not specify the role of the appellants. However, it observed that though two other Directors (Surinder Singh Kohli and Subhalakshmi Panse) were Independent Directors, they were also part of the Audit Committee of IFIN. On this basis, the NCLT allowed MA 2071 of 2019 and directed the impleadment of the proposed additional respondents, including the two appellants - Ms Neera Saggi and Ms Renu Challu.

9. Appeals were filed before the NCLAT. The NCLAT has, in paragraphs 5 and 6 of its impugned order, observed thus:

"5. In these appeals as similar question of law is involved, they were heard together and disposed of by this common judgment.

6. For the said