Section 141 NI Act: Offences by companies
Negotiable Instruments Act, 1881
Section 141 NI Act at a Glance
Section 141 NI Act fixes liability when a company or firm commits an offence under Section 138 NI Act. It makes the company, persons in charge of its business, and officers acting with consent, connivance, or neglect liable to prosecution.
Section 141 NI Act Bare Act Text
141. Offences by companies.
(1) 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:
Provided further that where a person is nominated as a Director of a company by virtue of his holding any office or employment in the Central Government or State Government or a financial corporation owned or controlled by the Central Government or the State Government, as the case may be, he shall not be liable for prosecution under this Chapter.
(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.
Amendments to this section
- Ins. by Act 55 of 2002, s. 8 (w.e.f. 6-2-2003).
Section 141 NI Act in Simple Words
Section 141 NI Act determines who is legally responsible when a company commits a cheque dishonour offence under Section 138 NI Act. Under Section 141(1) NI Act, if the person committing an offence under Section 138 NI Act is a company, both the company itself and 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 are deemed to be guilty of the offence and are liable to be proceeded against and punished accordingly.
Section 141(1) NI Act contains two provisos that act as a defence and an exemption from liability. Under the first proviso to Section 141(1) NI Act, a person in charge of the business has a defence and is not liable to punishment if that person proves that the offence was committed without the knowledge of that person, or that the person exercised all due diligence to prevent the commission of the offence. Under the second proviso to Section 141(1) NI Act, a person who is nominated as a director of a company by virtue of holding any office or employment in the Central Government, a State Government, or a financial corporation owned or controlled by the Central Government or a State Government is exempt and cannot be prosecuted under Chapter XVII of the NI Act. Act 55 of 2002 inserted this second proviso from 6 February 2003.
Section 141(2) NI Act applies notwithstanding Section 141(1) NI Act. Where any offence under the NI Act has been committed by a company and it is proved that the offence was 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, that director, manager, secretary, or other officer is also deemed to be guilty of that offence and is liable to be proceeded against and punished accordingly.
The Explanation to Section 141 NI Act widens the scope of the terms used in Section 141 NI Act. Under clause (a) of the Explanation, the word company means any body corporate and includes a firm or other association of individuals. Under clause (b) of the Explanation, the word director, in relation to a firm, means a partner in the firm.
When Section 141 NI Act Applies
- An offence under Section 138 NI Act (or under the NI Act for Section 141(2) NI Act) is committed by a company, which under the Explanation includes any body corporate, a firm, or other association of individuals.
- Under Section 141(1) NI Act, the company itself and every person who, at the time the offence was committed, was in charge of and responsible to the company for the conduct of its business are deemed guilty.
- Under Section 141(2) NI Act, any director (including a partner of a firm), manager, secretary, or other officer is also deemed guilty if it is proved that the offence was committed with the consent or connivance of, or is attributable to any neglect by, that officer.
- A person held liable under Section 141(1) NI Act can establish a defence by proving that the offence was committed without the knowledge of that person or that the person exercised all due diligence to prevent the offence.
Example of Section 141 NI Act
When Section 141 NI Act Does Not Apply
- A person under Section 141(1) NI Act proves that the offence was committed without the knowledge of that person (first proviso to Section 141(1) NI Act).
- A person under Section 141(1) NI Act proves that the person exercised all due diligence to prevent the commission of the offence (first proviso to Section 141(1) NI Act).
- The person is a director nominated by virtue of holding office or employment in the Central Government, a State Government, or a financial corporation owned or controlled by the Central or State Government (second proviso to Section 141(1) NI Act).
FAQs on Section 141 NI Act
What is Section 141 NI Act?▼
Section 141 NI Act is the provision that governs offences committed by companies, firms, and associations of individuals when a cheque is dishonoured under Section 138 NI Act. It makes the company as well as persons in charge of its business and officers acting with consent, connivance, or neglect liable to be proceeded against.
Does Section 141 NI Act apply to partnership firms and partners?▼
Yes. Under the Explanation to Section 141 NI Act, the term company includes a firm or other association of individuals, and the term director, in relation to a firm, means a partner in the firm.
What defence is available to a person in charge of a company under Section 141(1) NI Act?▼
Lack of knowledge or due diligence. Under the first proviso to Section 141(1) NI Act, a person is not liable to punishment if that person proves that the offence was committed without the knowledge of that person or that the person exercised all due diligence to prevent the offence.
Can a government nominee director be prosecuted under Chapter XVII of the NI Act?▼
No. Under the second proviso to Section 141(1) NI Act, a person nominated as a director by virtue of holding any office or employment in the Central Government, a State Government, or a government owned or controlled financial corporation cannot be prosecuted under Chapter XVII.
When can a manager or secretary of a company be held liable under Section 141(2) NI Act?▼
When consent, connivance, or neglect is proved. Under Section 141(2) NI Act, a director, manager, secretary, or other officer is deemed guilty if it is proved that the offence by the company was committed with the consent or connivance of, or is attributable to any neglect by, that officer.
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Sources: Bare Act Text, Negotiable Instruments Act, 1881 (India Code) ·