Peers last night defeated the government over its controversial corporate manslaughter bill, voting for an amendment to widen its scope to cover deaths in custody.

The Lords backed the change proposed by Lord Ramsbotham, the independent peer and former chief inspector of prisons, who argued managers in jails needed to be made accountable for the deaths of people under their guard.

The row has highlighted broader friction between the government and campaigners who say planned reforms of rules on corporate manslaughter and directors' duties would let companies and public bodies off too lightly and fail to hold individual managers responsible.

The Ministry of Justice warned earlier yesterday that time was running out for the corporate manslaughter bill, claiming it would fall if it was not passed before parliament rises next month. But the House of Lords information office contradicted this, saying the bill could in theory have parliamentary time until as late as October next year.

Lord Ramsbotham won peers' support by 183 to 145 for his amendment to reverse the government's "illogical" decision to exempt prisons from a proposal in the bill to end Crown bodies' immunity to corporate manslaughter charges. Before the vote, he had rejected the suggestion that defeating the government on the amendment could jeopardise the entire bill.

"We don't risk the killing off the bill," he said. "The only people who can kill the bill are the government."

Lord Ramsbotham said his amendment would ensure the Prison Service was held to account for "gross and totally unacceptable" failures of management of the kind that had contributed to the deaths of prisoners.

Lord Hunt, a Conservative peer who supported the amendment, said the exclusion of prisons from the bill made no sense "legally, morally or politically".

The government had said it wanted to decide at a later date whether to include prisons under the new rules, arguing that it wanted to see how the lifting of Crown immunity worked in other areas before extending it.

The new bill includes tougher provisions for companies such as "adverse publicity" orders requiring them to announce in the media details of findings against them. But critics say reforms should have gone further to include community service-style penalties, director disqualification and remedial orders for businesses to improve their practices.

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