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Lawyer (student)     05 October 2013

Liability of director

If a director of the limited company issues a cheque on the name of company by gives his authorization and if that cheque bounces what will be his liability...

i.e will his liability be limited or unlimited.



Learning

 4 Replies

Prasun Chandra Das (Banker)     05 October 2013

According to the following sections of the Negotiable Instruments Act:

 

141.

Offences by companies.

 

141.(1)Offences by companies. If the person committing an offence under    section    138 is a company,   every person who,   at    the    time the


offence was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly:

Provided that nothing contained in this sub-section shall render any person liable to punishment if he proves that the offence Was committed without his knowledge, or that he had exercised all due diligence to prevent the commission of such offence.

(2)Notwithstanding anything contained in sub-section (1), where any offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly,

 

Explanation.-For the purposes of this section,-

(a) "company" means any body corporate and includes a firm or other association of individuals; and

(b)   "director", in relation to a firm, means a partner in the firm.

1 Like

Lawyer (student)     06 October 2013

Very informative Thank u very much Sir.

Lawyer (student)     06 October 2013

but will he be liable for the value of his share or unlimited liability.

R Trivedi (advocate.dma@gmail.com)     06 October 2013

There are two aspects with cheque bounce, civil liability and criminal liability. For a running company, if the cheque is issued on behalf of the company under bonafide transaction, then the director's civil liability is almost nil (the stage for decree from his share generally do not come). (Pl refer to Company Act)

 

For the criminal aspect there is no monetary liability as such, the court may order all involved director's (S.141 as stated above, if proved and made accused), an imprisonment term (extending upto two years) including some monetary penatly. if this money is not paid then further jail term. (Pl refer to NI Act)

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