Section 44 of The Small Industries Development Bank of India Act, 1989
- (1)Every Director shall be indemnified by the Small Industries Bank against all losses and expenses incurred by him in, or in relation to, the discharge of his duties, except such as are caused by his own wilful act or default.
- (2)A Director shall not be responsible for any other Director or for any officer or other employee of the Small Industries Bank or for any loss or expenses resulting to the Small Industries Bank or from the insufficiency or deficiency of the value of, or title to, any property or security acquired or taken on behalf of the Small Industries Bank or the insolvency or wrongful act of any debtor or any person under obligation to the Small Industries Bank or anything done in good faith in the execution of the duties of his office or in relation thereto.
Summary
- The Small Industries Bank will protect and cover the expenses (indemnify) of its Directors for losses incurred while doing their jobs, unless the loss was caused by the Director's own willful act or default.
- A Director is not responsible for the actions, mistakes, or bad behavior of other Directors, officers, or employees of the bank.
- A Director is not personally liable if the bank loses money because a borrower goes bankrupt, or if property taken as security loses its value, as long as the Director acted in good faith.
Practical examples
FAQ
1. Will the bank pay for a Director's legal costs related to their official duties?
Yes, every Director is indemnified by the bank against expenses incurred in relation to the discharge of their duties, unless caused by their own willful act.
2. Can a Director be sued if a different bank employee makes a terrible mistake?
No, a Director shall not be responsible for any other Director, officer, or employee of the bank.
3. What happens if the bank accepts a building as security, but the building turns out to have a bad title or low value?
The Director is not responsible for the insufficiency or deficiency of the value or title of any property acquired by the bank, provided they acted in good faith.
Test yourself
Q1.Under Section 44 of The Small Industries Development Bank of India Act, 1989, in what circumstance will the bank refuse to indemnify a Director for their losses and expenses?
Q2.Under Section 44 of The Small Industries Development Bank of India Act, 1989, what is a Director's liability if a debtor of the bank becomes insolvent?
Q3.Under Section 44 of The Small Industries Development Bank of India Act, 1989, how is a Director's responsibility for other bank staff defined?
Q4.Under Section 44 of The Small Industries Development Bank of India Act, 1989, what protects a Director from liability regarding the value of property taken as security?