The "possessive poison" rule no longer seems to be something the GMAT enforces. I'm glad, as it can be a rather silly rule when enforced mindlessly.
The idea is that sentence 1 in the original post by vivekgautam1 and sentences 1 and 3 in the new post by psumit06 would be wrong because they use a non-possessive pronoun ("she" as a subject or "her" as an object) to refer to a possessive pronoun. Some see this as a violation, but as the various sentences in psumit06's post show, this can seem rather arbitrary. Are sentences 3 really any less clear than the others in terms of whom the pronoun refers to?
There are cases in which I might enforce the rule, but those would always come down to ambiguity. If I say "Dave's boss designed a spreadsheet that helped him in the presentation" or "Sarah thought that Jane's novel made her look foolish," you really might not know whether "him" is Dave or his boss, and whether "her" is Sarah or Jane. Someone who goes by the possessive poison rule would say that those pronouns must refer to the boss and Sarah. However, in an SC context, we'd just look for an answer that clearly conveyed one of those intended meanings. It's also likely that there would be additional content that would help to make the intended meaning clear.
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