Can a Company Secretary be arrested like Directors if something goes wrong?
That casual question from a batchmate recently sparked a serious inquiry. While directors and promoters are often in the spotlight when corporate scandals break, the role of the Company Secretary (CS) is equally critical—and legally, not immune.
Let’s break it down from a legal standpoint.
Legal Framework: Company Secretary as KMP
Under the Companies Act, 2013, a Company Secretary is classified as Key Managerial Personnel (KMP) [Section 2(51)] and can be treated as an officer in default [Section 2(60)].
This doesn’t mean every CS is automatically liable for corporate misconduct, but if something does go wrong—especially in areas involving compliance, disclosure, or fraud—a CS may have to answer for it.
Criminal Provisions You Should Know
Section 447 – Fraud
If a CS is found guilty of being involved in corporate fraud:
- Imprisonment: 6 months to 10 years
- Fine: 1–3 times the amount involved
- Note: If fraud involves public interest, minimum imprisonment is 3 years
Section 92 – False or Non-Filing of Annual Returns
If the CS knowingly omits material facts or submits a false return:
- Fine: Up to ₹50,000
- Imprisonment: Up to 6 months (though now largely decriminalized)
Section 134 – False Board Report / Financials
A CS who signs off on inaccurate reports can face:
- Imprisonment: Up to 3 years (now decriminalized)
- Fine: Up to ₹50,000
Section 448 – False Statements
Making knowingly false statements in filings or reports:
- Imprisonment: Up to 10 years
- Fine: Equal to the fraud amount
- Minimum 3 years if the fraud involves public interest
Landmark Judgments: What the Courts Say
Niranjan Hemchandra Sashittal v. State of Maharashtra (2013)
Key Takeaway: Simply holding a title isn’t enough for prosecution. But willful inaction or silent consent to fraud can justify criminal liability.
SEBI v. Pyramid Saimira Theatre Ltd. (2015)
Key Takeaway: A CS signed off on a fraudulent letter to SEBI. The court emphasized that a signature has legal consequences—blindly approving documents is not a valid defense.
NSEL Scam Case (2013)
Key Takeaway: The CS did not raise red flags despite knowing of internal irregularities in a ₹5,600 crore scam. Courts ruled that failure to act can make even non-promoter officers criminally liable.
How Can a CS Protect Themselves?
Here are key steps every Company Secretary must follow to stay legally protected:
- Verify before you sign: Ensure all documents and filings are accurate and complete. Don’t rely solely on team inputs.
- Speak up: Escalate concerns to the Board or Audit Committee in writing—especially if red flags surface.
- Maintain records: Keep written evidence of objections raised, concerns flagged, and the company’s responses.
- Don’t rubber-stamp: Avoid signing documents without full understanding. If something feels off—investigate first.
Final Thoughts
Yes, a Company Secretary can be held criminally liable under Indian law—especially when compliance lapses or fraudulent acts occur under their watch. While the title comes with prestige and trust, it also carries serious responsibility.
The key is to stay vigilant, document everything, and never compromise integrity for convenience. Being proactive isn’t just best practice—it could be the difference between being a professional and being a co-accused.
Written By – Hitendra Singh
