Understanding Gross Negligence and Wilful Misconduct

Reference Date | Version	February 27, 2025 | 1.0
Keywords	Misconduct, Wilful Misconduct, Negligence, Gross Negligence, intentional wrongdoing, deliberate acts
Legislation(s)/Policies	(i) The Information Technology Act, 2000 (ii) Information Technology (Reasonable Security Practices And Procedures And Sensitive Personal Data Or Information) Rules, 2011 (iii) Bharatiya Nyaya Sanhita, 2023 (iv) The Environment (Protection) Act, 1986 (v) The Consumer Protection Act, 2019 (vi) The Competition Act, 2002 (vii) The Companies Act, 2013
Jurisdiction	Republic of India

Date of First Publication: February 27, 2025

The expressions ‘gross negligence’ and ‘wilful misconduct’ are used in almost every commercial contract. In most cases, liability arising from ‘gross negligence’ and ‘wilful misconduct’ is contractually agreed to be outside the agreed limitations on liability. However, these expressions are seldom defined. An experienced corporate and commercial lawyer provides adequate context in the contract to determine whether ‘negligence’ or ‘misconduct’ in question would amount to ‘gross negligence’ and ‘wilful misconduct’. Nevertheless, it would be helpful to evaluate if there is a good case to define the terms ‘gross negligence’ and/or ‘wilful misconduct’ or spell out the parameters.

INTRODUCTION

The expressions ‘gross negligence’ and ‘wilful misconduct’ or their variants are used in almost every statute and contract and yet seldom defined. ‘Gross negligence’ is generally understood as a higher degree of failure to adhere to a standard of care which would be expected from a prudent person in similar circumstances, and ‘wilful misconduct’ is generally understood as knowingly deviating from a code of conduct which would be expected from a person under the circumstances or deviating from a specified code of conduct.

These expressions are intended to be interpreted in the context of the use case and, therefore, may be challenging to define. For example, ‘negligence’ may be understood in relation to medical negligence, deficiency of services or, neglect of fiduciary duty or neglect to furnish relevant information, and further, an act of negligence may have no adverse consequence on another person or, may result in injury to another or may even result in the death of another person.

This article seeks to examine the manner of use of the expressions ‘negligence’ / ‘gross negligence’ and ‘misconduct’ / ‘wilful misconduct’ under specific statutory provisions and the meanings attributable to such expressions or their variants under decided cases and propose a working definition which may be helpful while drafting and negotiating commercial contracts.

UNDERSTANDING ‘NEGLIGENCE’ AND ‘MISCONDUCT’ – STATUTES IN INDIA

There are various statutes which enjoin a duty on the relevant person with respect to a standard of care and/or with respect to adherence to a specific code of conduct, and failure to comply invites adverse consequences.

(1) Negligence in implementing and maintaining reasonable security measures

Section 43A (Compensation for failure to protect data) of The Information Technology Act, 2000 imposes liability on a body corporate that possesses, deals or handles sensitive personal data or information in a computer resource which it owns, controls or operates and is negligent in implementing and maintaining reasonable security measures, leading to wrongful loss or wrongful gain to any person.

The foregoing provision casts a duty to ‘implement and maintain reasonable security measures’, and any neglect to do so may attract adverse penal consequences if such neglect leads to wrongful loss or wrongful gain to any person. Thus, in the instant case, being ‘negligent’ by itself does not attract adverse consequences- the ‘negligence’ on the part of the body corporate must lead to wrongful loss or wrongful gain to a person.

To avoid ambiguity as to what may be construed as ‘negligent’, Rule 8 of the Information Technology (Reasonable Security Practices And Procedures And Sensitive Personal Data Or Information) Rules, 2011 states that the body corporate or a person on its behalf who has implemented either IS/ISO/IEC 27001 standard or the codes of best practices for data protection shall be deemed to have complied with reasonable security practices and procedures.

In other words, if it is established that the body corporate or a person on its behalf has implemented either IS/ISO/IEC 27001 standard, then such body corporate has not been negligent in implementing and maintaining reasonable security measures. In the instant case, the statute provides an objective standard of care to determine ‘negligent’ action.

(2) Negligence or rash acts causing death

Section 106 (Causing death by negligence) of the Bharatiya Nyaya Sanhita, 2023, imposes criminal liability on any person who causes the death of another by doing any rash or negligent act that does not amount to culpable homicide.

Criminal liability is attached to doing a rash or negligent act not amounting to culpable homicide. The act becomes an offence under this provision only if it is a rash or negligent act without intention or knowledge that such act is likely to cause death.

‘Culpable homicide’ means causing death by doing an act with the intention of causing death, or with the intention of causing such bodily injury as is likely to cause death, or with the knowledge that he is likely by such act to cause death, commits the offence of culpable homicide.

The statute in the instant case qualifies a ‘negligent act’ by requiring that such negligent act should not be accompanied with intention or knowledge.

(3) Negligence in acts likely to spread disease dangerous to life

Section 271 (Negligent act likely to spread infection of disease dangerous to life) of the Bharatiya Nyaya Sanhita, 2023 imposes criminal liability on any person who unlawfully or negligently commits an act that they know or have reason to believe is likely to spread the infection of disease dangerous to life.

Criminal liability is, among other things, attached to an act committed negligently, provided that the person committing the act knows or has reason to believe that such an act is likely to spread the infection of a disease dangerous to life.

In the instant case, in order to fasten criminal liability, the statute requires the act of negligence to be accompanied with knowledge or reason to believe that such negligent act would have specified consequences.

(4) Negligence or rashness in driving/riding on a public way

Section 281 (Rash driving or riding on a public way) of the Bharatiya Nyaya Sanhita, 2023, imposes criminal liability on any person who drives a vehicle or rides on a public way in a rash or negligent manner that endangers human life or is likely to cause hurt or injury to others.

In the instant case, the offence is linked to a negligent act resulting in human life being endangered, or to be likely to cause hurt or injury to any other person. There is no qualifier of knowledge or intent or reason to believe in respect of the negligent act.

(5) Negligent conduct leading to corporate liability

Section 16 (Offences by Companies) of the Environment (Protection) Act, 1986, imposes liability on a company and every person in charge at the relevant time for the conduct of the business for any offence under the said Act.

In addition, any ‘neglect’ on the part of any officer of the company shall also make such officer liable for such offence under the said Act. The expression ‘neglect’ is not qualified, and as long as it is proved that the offence is attributable to any neglect on the part of the officer, such officer shall be deemed to be guilty.

(6) Negligence in offences by government departments

Section 17 (Offences by Government Departments) of the Environment (Protection) Act, 1986, imposes liability on government departments and the head of the department for offences under the said Act.

In addition, any ‘neglect’ on the part of any officer (other than the head of the department) of the government department shall also make such officer liable for such offence under the said Act. The expression ‘neglect’ is not qualified, and as long as it is proved that the offence is attributable to any neglect on the part of the officer, such officer shall be deemed to be guilty.

(7) Negligence by Product Service Providers

Section 85 (Liability of Product Service Providers) of the Consumer Protection Act 2019 imposes a liability on the product service provider in case of a product liability action if, among other things, there was an act of negligence on the part of such product service provider which caused harm.

The act of negligence on the part of the product service provider attracts liability in case of a product liability action only if it is coupled with harm being caused.

(8) Neglect in statutory compliance

Section 48 (Contravention by Companies) of the Competition Act, 2002 imposes liability on the company and persons for contravention under the said Act or any rule, regulation, order made, or direction issued.

In addition, any ‘neglect’ on the part of any director, manager, secretary, or other officers of the company shall make such officer(s) also deemed to be in contravention of the provisions of said Act. The expression ‘neglect’ is not qualified, and as long as it is proved that the offence is attributable to any neglect on the part of the officer, such officer shall be deemed to be in contravention of the provisions of the said Act.

(9) Due and reasonable care by directors

Section 166(3) (Duties of directors) of the Companies Act, 2013, enjoins upon a director of a company to exercise his duties with due and reasonable care, skill and diligence and exercise independent judgment.

The courts In India have held that directors owe a duty of care to the company not to act negligently in the management of its affairs, the standard being that of a ‘reasonable man’ looking after his own affairs.[1]

In the instant case, ‘negligence’ is determined by reference to the standard of a ‘reasonable man’ looking after his own affairs.

(10) Misconduct by a drunken person in public

Section 355 (Misconduct in public by a drunken person) of the Bharatiya Nyaya Sanhita, 2023, criminalizes appearing in a public place or trespassing into any place while in a state of intoxication and conducting oneself in a manner that causes annoyance to any person.

In this provision, the conduct of the person in a specified place is qualified as ‘annoyance’ being caused to another person.

(11) Sexual harassment treated as misconduct

Section 19 (Duties of Employer) of The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, mandates employers to treat sexual harassment as ‘misconduct’ under service rules and initiate action for such misconduct.

Per this provision, ‘sexual harassment’ at the workplace qualifies as ‘misconduct’, and the definition of ‘sexual harassment’ involves unwelcome acts or behaviour (whether directly or by implication).

(12) Misconduct by a public servant

Section 13 (Criminal misconduct by a public servant) of The Prevention of Corruption Act, 1988 provides for punishment of criminal misconduct by a public servant. This offence occurs when a public servant dishonestly or fraudulently misappropriates or converts any entrusted property for personal use or allows others to do so, or the public servant intentionally enriches himself illegally during their office tenure.

In the instant case, in order to fasten criminal liability to ‘misconduct’ by a public servant, such ‘misconduct’ is to be accompanied with dishonest or fraudulent intent.

It is clear from the foregoing that the expressions ‘negligence’ and ‘misconduct’ are used in varying contexts, and in most cases, the negligent act or act of misconduct is linked to the legitimacy of such an act and also to the outcome of such an act.

Thus, the following parameters may be used to determine ‘negligence’ and ‘misconduct’:

Negligence- an act may be considered as ‘negligence’ in any one or more of the following cases;

(i) Failure to implement specified standards leading to wrongful loss or wrongful gain

(ii) Knowledge or reason to believe that such an act would have specified consequences

(iii) Any act likely to cause hurt or injury or harm to any other person

(iv) The standard of a reasonable man as if he is looking after his own affairs

Misconduct – an act may be considered as ‘misconduct’ in any one or more of the following cases;

(i) Conduct of a person outside their private space causing annoyance to another

(ii) Conduct with the intent to enrich oneself in an unlawful manner

(iii) Conduct involving dishonesty or fraudulent intent

(iv) Conduct involving misappropriation of property

(v) Unwelcome conduct

UNDERSTANDING ‘GROSS NEGLIGENCE’ AND ‘WILFUL MISCONDUCT’

‘Gross negligence’ indicates a significantly higher degree of negligence, and ‘wilful misconduct’ in most cases indicates knowledge of such misconduct and its outcome. Parameters relevant for determining ‘gross negligence’ and ‘wilful misconduct’ are discussed below.

(1) A mixed question of fact and law

Gross negligence indicates a higher level of neglect. Depending mostly on the specific facts and circumstances of each case, the question of gross negligence is typically a factual one or, at best, a mixed question of fact and law. No rigid rule can be established to act as a straightjacket covering all possible contingencies. In a case titled Ahmedabad Municipal Corporation of the City of Ahmedabad v. Haji Abdulgafur Haji Hussenbhai[2], the subject matter property was auctioned and purchased at a court sale. At the time of purchase, there were municipal taxes in respect of the property in arrears since 1949. The municipal corporation threatened to sell the property pursuant to the attachment. The court, in the present case, determined that the municipal corporation was far more negligent and blameworthy on the basis that the respondent could not reasonably have thought that the municipal corporation had not cared to secure payment of the taxes due since 1949..

(2) Duty to take care

In the case of Indian Airlines v. Kurian Abraham[3], the question was whether or not the carrier’s failure to take all necessary precautions during the transportation of curcuma powder amounted to wilful misconduct, thereby disqualifying it from relying on the limited liability provisions as per Rule 25 (1) of the Carriage by Air Act. The court, in the present case, determined that since the detailed measures for ensuring the safety and security of the cargo were within the exclusive knowledge and control of the carrier, it was incumbent upon the carrier to prove that it had exercised all necessary care. The plaintiff could not be expected to show the intricate safety protocols followed by the carrier. In the absence of any evidence demonstrating that the carrier had taken every requisite precaution—and that the loss occurred despite such efforts—the only logical conclusion was that the carrier’s conduct amounted to wilful misconduct.

It was further held in the above case that ‘Wilful misconduct’ equates to having actual knowledge of the danger combined with a deliberate failure to prevent injury. ‘Wilful’ generally implies actions taken deliberately, knowingly, or intentionally. Thus, it can be said that the term ‘wilful misconduct’ suggests the presence of an element of mens rea.

(3) Extent of lack of care

It can be stated that ‘misconduct’ is not far from negligence, including gross and culpable negligence. To illustrate, a person may negligently violate a code of conduct – the facts and circumstances will determine if the act in question would amount to ‘negligence’, ‘gross negligence’, ‘misconduct’ or ‘wilful misconduct’.

The word ‘misconduct’ includes wrongful commission and omission, intentional or unintentional, any act which was done wrongfully or which was neglected to be done, or in other words, doing what should not have been done or not doing what should have been done.

 

In the case of Dharani Mohan Roy v. Pramatha Nath Roy and Ors.[4], the question was whether or not the prior equitable mortgage held by the appellant should be postponed in favour of the subsequent mortgagee due to ‘gross neglect’ under Section 78 of the Transfer of Property Act, 1882, which allows a later mortgage to take precedence if the prior mortgagee’s negligence enabled the mortgagor to create a subsequent mortgage. The court in the present case held that ‘gross negligence’ is a relative term and means the absence of the care that was requisite under the circumstances, and the question of gross negligence is always treated as a question of fact, and its determination must depend on the circumstances of each case. The court further stated that a slight neglect or carelessness does not substitute the exception for the general law.

(4) Element of knowledge

When assessing the outcome of a wrongful act, it is important to distinguish between an unintended mistake and a deliberate neglect of duty. Even if an action deviates from established norms and results in harm, it does not automatically qualify as wilful misconduct unless it is shown that the responsible party knowingly put others at risk.

In the case of Syad Akbar vs. State of Karnataka[5], on March 18, 1974, while driving a passenger bus, the appellant swerved the vehicle towards the extreme right side of the road to avoid a 4‑year‑old girl who suddenly ran across the road, but in spite of this, the child was caught under the left front wheel of the vehicle and was crushed to death. The court in the present case determined that the mere fact that an act was carried out against a plan, instructions, or standards, with the knowledge that it was wrong, does not in itself prove wilful misconduct. To establish wilful misconduct, it must be established that the person knew the act was against the interests of those he was responsible for or that it exposed them to greater risk than if he had not done it. If the person in charge believed he was acting in the best interests of those under his responsibility, then a grave error in judgment does not constitute wilful misconduct.

(5) Repetition of the act, not an essential element

Even a single act of negligence or misconduct will be sufficient to invite consequences of ‘gross negligence’ or ‘wilful misconduct’ if such an act is grave in nature.

In the State of Punjab and Ors. v. Ram Singh[6], the issue before the court was whether or not a single act of heavy drinking by the respondent while on duty resulting in him being seen roaming with the service revolver, engaging in a quarrel with the doctor on duty, and abusing the doctor when sent for medical examination could amount to the ‘gravest misconduct’ warranting dismissal. The court held that it is not the repetition of the acts complained of but the quality, insidious effect, and gravity of the situation that ensues from the offending ‘act’. The word “acts” would include singular “act” as well.

VIEWPOINT

The expressions ‘negligence’, ‘gross negligence’, ‘misconduct’, and ‘wilful misconduct’ connote varying degrees of ‘lack of care’ or ‘unacceptable act’ or ‘unacceptable omission to act’. It is not a matter of debate that these expressions must be understood in the context of specific facts and circumstances, and one rule will not apply to all situations. However, parameters which must be considered to interpret these expressions are likely to prove useful.

In most circumstances, it may be advantageous to define the parameters of ‘gross negligence’ and ‘wilful misconduct’ in commercial contracts, as typically there is a tendency to equate them with ‘criminal liability’, and liability in such cases is sought to be unlimited.

Drawing from the usage of these expressions in various statutes and interpretations in decided cases, the following parameters may be used to develop circumstance-appropriate definitions.

‘Gross Negligence’ in relation to a person shall mean:

(i) A lack of care that demonstrates a wilful, reckless, or wanton disregard for the rights of others, or

(ii) A heightened degree of negligence representing a substantial lack of concern or substantial deviation from the ordinary standard of care or

(iii) Disregard of the consequences and a failure to use even slight care to avoid harm to the other.

‘Wilful Misconduct’ in relation to a person shall mean:

(i) Intentional wrongdoing that evinces a reckless indifference to the interest of the other concerned parties, or

(ii) Knowingly making wrong statements to the concerned persons with a view to gain personal advantage.

Often, it is necessary to include what would not constitute ‘gross negligence’ or ‘wilful misconduct’ in commercial contracts. For example, acting under a superior’s instructions may be considered an exception to ‘gross negligence’ in most circumstances.

Thus, while taking the effort to define parameters to determine ‘gross negligence’ and ‘wilful misconduct’, it would be a valuable exercise to lay out the exceptions.

Legal Support in the Corporate and Commercial Sector:

If you are interested in topics like ‘gross negligence’, ‘wilful misconduct’, ‘negligence’, or ‘misconduct’, reach out for information or support to our legal firm in Gurgaon with expertise in corporate and commercial. Our team of corporate lawyers would be happy to understand your specific requirements and work with your team to address various issues relating to commercial contracts. Please feel free to contact us for more information on how our legal firm in NCR can help.

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