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CS Professional · Compliance Management, Audit and Due Diligence · Due Diligence

Kaveri Textiles Ltd selects Ms. Iyer from the notified independent directors' data bank and appoints her without checking her background, since the data bank lists her as eligible. A later review finds a disqualifying relationship. On whom does the Companies Act, 2013 place the responsibility of exercising due diligence before selecting a person from the data bank?

The responsibility lies with the company making the appointment. The proviso to section 150(1) says that due diligence before selecting a person from the data bank rests with the appointing company, so listing in the data bank does not relieve the company of its duty to verify the candidate.

  1. AThe body maintaining the data bank
  2. BThe Central Government
  3. CThe company making the appointmentCorrect
  4. DThe statutory auditor of the company

Explanation

The proviso to section 150(1) states that the responsibility of exercising due diligence before selecting a person from the data bank as an independent director lies with the company making the appointment. Listing in the data bank does not shift that responsibility to the data bank maintainer or the Government.

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