Compliance Management, Audit and Due Diligence · Relief and Remedies

Who Can Get Relief under Section 463 of the Companies Act

Updated 11 October 2026 · Fact-checked

Section 463 lets a court excuse an officer of a company, wholly or partly, from liability for negligence, default, breach of duty, misfeasance or breach of trust. The officer must show three things: he acted honestly, he acted reasonably, and he ought fairly to be excused given all the circumstances, including his appointment.

Understand Persons Eligible and Grounds for Relief

Directors and other officers can be sued or prosecuted for things that go wrong in a company. Some of these people did their best and still made a mistake. Section 463 is the safety valve for them. It lets the court forgive the liability, fully or in part, if the person deserves it.

The section applies in proceedings for negligence, default, breach of duty, misfeasance or breach of trust against an officer of a company. The officer need not be proved liable. It is enough that it appears he is or may be liable. The court then asks whether he should still be excused.

The officer must satisfy three conditions together. First, he acted honestly. Second, he acted reasonably. Third, having regard to all the circumstances, including those connected with his appointment, he ought fairly to be excused. Miss any one and relief fails. Honesty alone is not enough; a careless but honest director can still be refused.

Who is covered? The section text speaks of an "officer of a company". Under the definition in section 2(59), this includes a director, manager and key managerial personnel, and a person on whose directions the Board is accustomed to act. The section does not name auditors or experts. Your syllabus lists officers, auditors and experts as the persons concerned, so in an answer state the wording of the section first, then apply it to the person in the facts. Do not claim the section names auditors.

Relief is the court's discretion. It may be wholly or partly, and on such terms as the court thinks fit. Two limits matter. In a criminal proceeding the court cannot relieve civil liability. And before granting relief the court must call upon the Registrar, and others if needed, to show cause why relief should not be granted.

Key rules to remember

Persons covered: Officer of a company who is or may be liable; The section speaks of an officer. It does not list auditors or experts by name. Check how the facts describe the person.
Grounds (types of liability): Negligence | default | breach of duty | misfeasance | breach of trust; Relief is available only in proceedings for one of these five.
Three conditions for relief: Acted honestly AND acted reasonably AND ought fairly to be excused; All three are needed. The fairness test looks at all circumstances, including those connected with his appointment.
Extent of relief: Wholly or partly, on such terms as the court thinks fit; Relief is discretionary, not a right. The court may attach terms.
Criminal proceedings limit: Criminal proceeding: no power to relieve civil liability; The proviso to section 463(1). Civil liability stays even if the court gives relief in the criminal case.
Apprehended proceedings: Reason to apprehend a proceeding: apply to the High Court; Section 463(2). The High Court has the same power as a court hearing the case under sub-section (1).
Notice before relief: Court must require the Registrar (and others if needed) to show cause; Section 463(3). No relief under (1) or (2) without this notice.

How to solve Persons Eligible and Grounds for Relief questions

Use this order for any case question on section 463. It mirrors the provision, analysis, conclusion format.

1Identify the person. Is he an officer of the company, such as a director, manager or KMP? If the facts name an auditor or expert, say the section speaks of an officer and address that point.
2Identify the proceeding and the allegation. Check that it is negligence, default, breach of duty, misfeasance or breach of trust. Note whether it is civil or criminal.
3State that relief is possible even if he only may be liable. You need not first prove liability.
4Test honesty. Look for facts showing good faith, such as disclosure, no personal gain, no concealment.
5Test reasonableness. Look for facts such as reliance on proper reports, due enquiry, attending meetings and a reasonable response to red flags.
6Test fairness. Weigh all circumstances, including those connected with his appointment, such as a nominee or non-executive role, how much he knew, and the loss caused.
7Check the limits. In a criminal proceeding, civil liability cannot be relieved. Mention the show cause notice to the Registrar under sub-section (3).
8Conclude. Say whether relief is likely, wholly or partly, and that it is the court's discretion on such terms as it thinks fit.

Quickest way: Four-line answer frame for section 463

When to use it: Use when time is short, or for a short note on who can claim relief and on what grounds.

Line 1: Name the section. An officer who is or may be liable for negligence, default, breach of duty, misfeasance or breach of trust may be relieved by the court.
Line 2: List the three tests: honestly, reasonably, ought fairly to be excused (with appointment circumstances).
Line 3: Apply each test to one fact from the case.
Line 4: Add the limits (criminal proviso, Registrar notice, High Court route for apprehended claims) and conclude.

Common mistakes in Persons Eligible and Grounds for Relief

Saying honesty alone is enough for relief.
Students remember the word honestly and forget that the section uses three tests joined by and.
Fix: Write all three conditions every time: honest, reasonable, and fairly deserving of excuse.
Stating that section 463 names auditors and experts.
Older law and the syllabus wording mention auditors, so students assume the section does too.
Fix: Quote the section as covering an officer of a company. Then say how the person in the facts fits, without inventing wording.
Thinking relief is available only after liability is proved.
Students read relief as something that follows a finding against the officer.
Fix: Remember the words is or may be liable. The court can grant relief when it appears he may be liable.
Saying the court can wipe out civil liability in a criminal case.
The proviso is short and easy to skip.
Fix: State the proviso: in a criminal proceeding the court has no power to relieve civil liability.
Treating relief as an automatic right or always total.
Students focus on the officer's good conduct and forget the court's discretion.
Fix: Use the words wholly or partly, on such terms as it thinks fit. Say the court may refuse.
Ignoring the apprehension route and the Registrar notice.
Students stop after the three tests.
Fix: Add sub-section (2) (High Court application when a proceeding is apprehended) and sub-section (3) (show cause notice to the Registrar).

Worked examples

Example 1

Meera, a non-executive director of Kaveri Foods Ltd, approved a loan to a group company on the CFO's written credit report and after discussion at the Board. The report later proved wrong because the CFO hid a default by the borrower. Meera made no gain. The company sues her for negligence. Can she claim relief under section 463?

Show the solution

Provision: section 463(1) lets the court relieve an officer who is or may be liable for negligence, default, breach of duty, misfeasance or breach of trust, if he acted honestly and reasonably and ought fairly to be excused.
Person and proceeding: Meera is a director, so an officer. The proceeding is for negligence, one of the listed grounds. It is enough that she may be liable.
Honesty: she took no personal gain and acted on the information she was given. Nothing suggests bad faith.
Reasonableness: she relied on a written credit report and the Board discussed the loan. The default was hidden by the CFO, so a non-executive director could not easily have found it. This supports reasonable conduct.
Fairness: considering her non-executive appointment, her limited access to the borrower's records and the CFO's concealment, it is fair to excuse her.
Procedure: the court must first require the Registrar to show cause why relief should not be granted.

Answer: Meera has a good case for relief, wholly or partly, as she appears to have acted honestly and reasonably and ought fairly to be excused. The relief is discretionary and the court may impose terms. It must give the Registrar notice to show cause before granting it.

Example 2

Rohan, managing director of Sagar Textiles Ltd, learns that a shareholder is preparing a complaint against him for breach of trust over a delayed statutory filing. No proceeding has yet started. He asks whether he can seek protection now. Also, if a criminal case were filed, could the court relieve him of civil liability?

Show the solution

Provision: section 463(2) allows an officer who has reason to apprehend a proceeding for negligence, default, breach of duty, misfeasance or breach of trust to apply to the High Court for relief.
Application: Rohan is an officer, and the apprehended allegation is a breach of trust. He may apply to the High Court now.
Power: the High Court has the same power it would have had if a court were hearing the case under sub-section (1). So it applies the same tests: honesty, reasonableness and whether he ought fairly to be excused.
Notice: under sub-section (3) the court must first require the Registrar, and others if it thinks necessary, to show cause why relief should not be granted.
Criminal case: the proviso to sub-section (1) says that in a criminal proceeding the court has no power to grant relief from civil liability. It can consider relief only from the criminal liability.

Answer: Yes. Rohan can apply to the High Court under section 463(2) on a reasonable apprehension of proceedings, and he must prove honesty, reasonableness and that he ought fairly to be excused, after the Registrar is given notice. In a criminal proceeding the court cannot relieve his civil liability.

Exam tips

Open with the section and list the three tests. Examiners look for honestly, reasonably and ought fairly to be excused.
In case questions, quote a specific fact for each test. A bare conclusion earns few marks.
Always mention the criminal proceeding proviso and the Registrar show cause notice. These are easy extra marks.
When the facts involve an auditor or expert, state that the section speaks of an officer and then reason from the facts and the definition of officer.
This is an open question on discretion. Use may and likely, not will and must, when you conclude.

Practice questions from Relief and Remedies

Persons Eligible and Grounds for Relief: frequently asked questions

Who can claim relief under section 463 of the Companies Act, 2013?

The section speaks of an officer of a company who is or may be liable for negligence, default, breach of duty, misfeasance or breach of trust. This includes directors, managers and key managerial personnel, as defined in section 2(59). The text does not name auditors or experts, so address their position by reasoning on the facts.

What must an officer prove to get relief?

He must show that he acted honestly, that he acted reasonably, and that having regard to all the circumstances, including those connected with his appointment, he ought fairly to be excused. All three are needed. The court then decides whether to relieve him wholly or partly and on what terms.

Can relief be sought before a case is filed?

Yes. An officer who has reason to apprehend a proceeding can apply to the High Court. The High Court has the same power to grant relief as a court hearing the case. It must first give notice to the Registrar to show cause.

Does section 463 protect against civil liability in a criminal case?

No. The proviso says that in a criminal proceeding the court has no power to grant relief from any civil liability attached to the officer for the same negligence, default, breach of duty, misfeasance or breach of trust.