Negligence and Suing of the Company

Oct 8, 2020


Negligence in India is under the purview of the Law of Torts, which is not a codified law. In India, the courts follow Common Law principles wherever they are suitable to the current circumstance of India and are equitable and fair. But negligence is treated as civil liability for the corporates. Generally, negligence is treated as damage caused to a party due to actions done by another party. This article deals with meaning, elements, and case of negligence, along with the most common reason for using a company.

Concept of Negligence

Negligence is a civil tort law principle where a plaintiff alleges a defendant has infringed a duty of care that has caused harm. Mostly, corporate negligence can be hard to determine. To hold a business responsible for negligence, a claimant must claim that the company has violated a legal duty it owes and that such actions or omissions have caused damage. For example, a credit card company that accidentally released its customers' confidential financial information causing the risk of identity theft may be found negligent. It also follows the principle of vicarious liability, where a parent company may be liable for the negligence behaviour of the subsidiary company. The four elements need to prove by the plaintiff for negligence are:

1. There was the duty of the defendant towards the plaintiff.

2. The defendant breached the duty of care present towards the plaintiff.

3. The plaintiff suffered an injury because of the defendant's act.

  1. The plaintiff has to prove that the said injury caused is legally recognized.

A company's civil liability is a duty for the company to sue for physical harm or tangible and intangible damage caused to a third party by the company, company's property, and employees for some time. There are a variety of cases where liability for the company may be invoked. Civil liability laws prescribe the rules specifying the conditions under which victims of an accident can claim compensation from the party responsible. Tort / quasi tort liability is one of the corporate civil liabilities, where the directors as such are not liable for the torts or civil wrongs of their company. To make a person liable for a tort, e.g. for negligence, trespass, nuisance, or defamation it must be shown that he was himself the wrongdoer or that he was the employer or principal of the wrongdoer about the act complained of, or that the tort was committed on his instructions. A typical scenario where a negligence lawsuit is brought against a firm is where its shareholders file suit alleging that the company was engaged in deceitful acts or otherwise damaged the value of the stock of the company.


In Om PrakashKhaitan v. Shree Keshariya Investment Ltd that it would be proper to relieve directors of consequences of defaults and the breaches unless they are directly involved in the acts or omission complained of or have otherwise not acted honestly or reasonably or had a financial involvement in the company.

In a leading case of Rajkot Municipal Corporation v. ManjulbenJayantilal Nahum and Others, the Supreme Court held that negligence is the absence of doing anything that a reasonable man might drive by certain principles that normally govern the conduct of human affairs, do or do something that a prudent and rational man would not. The accused could have been liable for negligence if they inadvertently failed to do what a reasonable person would have done or done what a person taking reasonable care would have failed to do. As a general rule, however, failure to act is not incompetent unless there is a properly acting one. The obligation may occur because of the defendant's conduct itself, or by statute, it may be established. Normal standards of negligence law also extend to public authorities. The court further stated that there must be a close relationship between the parties and mere the appearance of damage does not enforce liability over the party.

Normal standards of negligence law also extend to public authorities. They are responsible for harm caused by an act of negligence where they must act or in the event of a reckless failure to consider whether to exercise power bestowed on them with the intention that it should be exercised and when and when it is necessary by the public interest. Suppose a public authority has agreed to exercise power, and has done so in a careless manner. In that case, an individual who has acted on what the public authority does may have little difficulty in proving that the harm was caused by negligent failure to act and that there may be little greater difficulty in proving the cause.

The Most Common Reasons for Suing a Company

  • Suppliers or customers think a contract has been breached by the corporate.
  • Shareholders claim the enterprise deceived the public about the financial condition of the enterprise.
  • Customers or other company property visitors say they suffered an accident due to a reckless failure to preserve the property's protection.
  • Customers say they sustained damage as a result of a product malfunction while using the company's product.
  • Customers argue that the services rendered fall below a reasonable standard of care in cases where the organization or persons are liable to lawsuits for malpractice or negligence in the field.
  • Employees are incompetent when conducting work responsibilities and employees that suffer injuries due to negligence seek lawsuits under agency regulations against businesses, etc.


It can be concluded that the law does not state an express provision for negligence, but it means a breach of a legal duty of care without intention. In addition, the public authority can also be held liable for negligence