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A company commits an offence under section 138 of the Negotiable Instruments Act, 1881. What is the…

Section 141(1) focuses on who was in charge of and responsible to the company for conducting its business when the offence occurred. The first proviso lets a person avoid…

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A company commits an offence under section 138 of the Negotiable Instruments Act, 1881. What is the general basis for holding a director liable under section 141(1), subject to its provisos?

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Answer and explanation

Correct answer A

Section 141(1) focuses on who was in charge of and responsible to the company for conducting its business when the offence occurred. The first proviso lets a person avoid punishment by proving lack of knowledge or due diligence. The second exempts directors nominated by virtue of specified government employment, government office or office or employment in a financial corporation owned or controlled by the government.

Option feedback

Option A

Section 141(1) requires the person's relevant responsibility at the time of the offence.

Option B

Management responsibility at filing does not establish the required role at the time of the offence.

Option C

Shareholding and a board seat alone do not establish responsibility for conducting the company's business.

Option D

Later management responsibility does not establish the required role when the offence occurred.

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