Duties of directors
Section 166 of the Companies Act, 2013 deals with duties of directors. Subject to the provisions of this Act, a director of a company shall act in accordance with the articles of the company. The Act came into force on 01 Apr 2014.
(1) Subject to the provisions of this Act, a director of a company shall act in accordance with the articles of the company.
(2) A director of a company shall act in good faith in order to promote the objects of the company for the benefit of its members as a whole, and in the best interests of the company, its employees, the shareholders, the community and for the protection of environment.
(3) A director of a company shall exercise his duties with due and reasonable care, skill and diligence and shall exercise independent judgment.
(4) A director of a company shall not involve in a situation in which he may have a direct or indirect interest that conflicts, or possibly may conflict, with the interest of the company.
(5) A director of a company shall not achieve or attempt to achieve any undue gain or advantage either to himself or to his relatives, partners, or associates and if such director is found guilty of making any undue gain, he shall be liable to pay an amount equal to that gain to the company.
(6) A director of a company shall not assign his office and any assignment so made shall be void.
(7) If a director of the company contravenes the provisions of this section such director shall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees.
Section 166, The Companies Act, 2013 (Act 18 of 2013).
Related judgements & precedents
These are some judgments that construed this section, and hold precedence value. They hold authority on how to read, interpret and use this section.
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Dale and Carrington Investment (P) Ltd. v. P.K. Prathapan
Court's Decision & Legal Precedent
Judgment of Main Case order-9.pdf 2004-09-13. CA 1126/2002. Directors occupy a fiduciary position; an allotment of shares to gain control or for a collateral personal purpose is a breach of that duty and is liable to be set aside. Companies Act 2013 s.166 now codifies those duties (good faith, objects of the company, due care, no conflict). Map companies-act 166 as cited teaching of the duty now in the 2013 Act.
On this section: s.166 of the 2013 Act now codifies directors' duties (good faith, objects of the company, due care, no conflict / no personal profit). Dale & Carrington (1956 Act) is the leading Indian teaching that a self-serving share allotment to grab control is a fiduciary breach — that duty is what s.166 states.
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Tata Industries Limited vs Cyrus Investments Pvt. LTD
Court's Decision & Legal Precedent
The removal of a Director from office, even if carried out in a manner that may be questioned on procedural grounds, cannot be termed as oppressive or prejudicial conduct under Sections 241 and 242 of the Companies Act, 2013, unless it is part of a larger design to oppress or prejudice the interests of some members. The invocation of the 'just and equitable' clause for winding up requires either a functional deadlock or an irretrievable breakdown of trust and confidence in a quasi-partnership relationship. The affirmative voting rights of Directors nominated by institutional shareholders holding majority stakes are valid and do not constitute oppressive conduct. The Tribunal cannot grant reliefs not sought by the petitioners or not permitted under law, including reinstatement of a director after the expiry of his tenure. The conversion of a company from public to private status is valid if the company satisfies the statutory criteria for being classified as a private company, and the Tribunal cannot interfere with such conversion on the ground of lack of probity without establishing actual oppressive or prejudicial conduct.
On this section: Duties of directors. The Court discussed the fiduciary duties of directors and the duty to act in good faith and in the best interests of the company.
The holding above is the ratio decidendi as extracted from the judgment by eCourts India, reproduced unaltered — it is a rendering of the court's reasoning, not a substitute for its words. Read the order itself before relying on it.
Judgments citing this section
These may be obiter dicta or a precedent, for you to study. These are the judgments where this section is quoted.
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… RI for four years for offences u/s 420 r/w 120B of IPC and a fine of Rs. 1000/-, and in default of fine RI for 3 months. Further, for offences u/s 166(5) of Companies Act a fine of Rs. 1,00,000/- was imposed and in default thereof, SI for 3 months and further fine of Rs. 5,00,000/- for offences u/s 188 of Companies Act was imposed and in default thereof, SI for 6 months. The present quashing petition seeks quashing of the present FIR qua the present petitioners …
Questions about Section 166
What have the courts held on Section 166 of the Companies Act?
Dale and Carrington Investment (P) Ltd. v. P.K. Prathapan (13 Sep 2004) is the leading judgment on this section among those set out below: s.166 of the 2013 Act now codifies directors' duties (good faith, objects of the company, due care, no conflict / no personal profit). Dale & Carrington (1956 Act) is the leading Indian teaching that a self-serving share allotment to grab control is a fiduciary breach — that duty is what s.166 states. Another 1 judgment on this section is set out below, all of them from the Supreme Court. They run from 2004 to 2021.
How do I find court cases under Section 166 of the Companies Act?
In judgments and charge sheets this section is written several ways, and each form finds a different set of orders. These search the full text of every order eCourtsIndia holds, best matches first: Companies Act 166, section 166 Companies Act, section 166 of the Companies Act. People searching for it also type companies act 2013 section 166. Each opens the full list of orders on eCourtsIndia, where it can be narrowed by court, year and outcome. 2 reported judgments on this section are set out on this page, beginning with Dale and Carrington Investment (P) Ltd. v. P.K. Prathapan (13 Sep 2004).
When did Section 166 of the Companies Act come into force?
Section 166 of the Companies Act, cited as Companies Act 166, came into force on 01 Apr 2014, having been enacted on 29 Aug 2013. It is in force as at the date shown on this page.
Other sections of this Act
- 2. Definitions5089 words
- 143. Powers and duties of auditors and auditing standards1867 words
- 230. Power to compromise or make arrangements with creditors and members1432 words
- 232. Merger and amalgamation of companies1416 words
- 149. Company to have Board of Directors1403 words
- 217. Procedure, powers, etc., of inspectors1390 words
Source and method. Compiled from the enactments of Parliament and of the State legislatures as published on India Code, and republished together with commentary and other original matter under section 52(1)(q)(ii) of the Copyright Act, 1957. Structured, cross-referenced and maintained by eCourtsIndia. Text as in force on 14 Oct 2026. This page is not a substitute for legal advice.