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CS Executive · Jurisprudence, Interpretation and General Laws · Law relating to Information Technology

Meghna Traders, a proprietorship firm in Pune, stores customers' sensitive personal data on its own server. Because it was negligent in maintaining reasonable security practices, the data was leaked and a customer suffered wrongful loss. Under the Information Technology Act, 2000, what is the consequence for the firm?

The firm must pay damages by way of compensation to the affected customer. Section 43A covers any body corporate, which is defined to include a sole proprietorship engaged in commercial activity, and requires only negligence in maintaining reasonable security practices, not intention to cause loss.

  1. AIt is liable to pay damages by way of compensation to the affected customer, since a sole proprietorship engaged in commercial activity is a body corporate for this purposeCorrect
  2. BIt is not liable, because a proprietorship is not a company and so falls outside the meaning of body corporate
  3. CIt is liable only if the customer proves that the firm intended to cause the loss
  4. DIt is liable only to imprisonment and not to any compensation

Explanation

Section 43A makes a body corporate that is negligent in maintaining reasonable security practices liable to pay damages by way of compensation. The Explanation defines body corporate to include a firm, sole proprietorship or other association engaged in commercial or professional activities. Intention is not needed, only negligence, so the second and third options are wrong.

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