Section 141 of NIA : Section 141: Offences By Companies

Explanation using Example

Imagine a scenario where "QuickTech Solutions Pvt. Ltd." issues a cheque to a supplier, "Hardware Corp," for the purchase of computer equipment. The cheque is signed by the managing director of QuickTech. However, due to insufficient funds in QuickTech's account, the cheque gets dishonored.

Under Section 138 of the Negotiable Instruments Act, issuing a dishonored cheque due to insufficient funds is an offence. According to Section 141, not only is QuickTech Solutions Pvt. Ltd. liable for the offence, but also the managing director who was responsible for the company's business at the time the cheque was issued.

If taken to court, the managing director could avoid liability by proving that he had no knowledge of the offence and that he had exercised due diligence to prevent such an occurrence. For example, if he can show that he had established strict financial controls and the dishonor happened due to an unforeseen error by the finance team, he might not be punished.

Conversely, if evidence suggests that the managing director or any other key officer of QuickTech was aware of the company's insufficient funds and still consented to issue the cheque, they could also be deemed guilty and face prosecution.