CS Professional · Corporate Restructuring, Valuation and Insolvency · Insolvency
An insolvency professional contravened the Code, causing identifiable loss of ₹40 lakh to creditors, while he made an unlawful gain of ₹10 lakh. The disciplinary committee finds sufficient cause and imposes a penalty under section 220(3). What is the penalty amount?
The penalty is ₹1.2 crore. Section 220(3) prescribes three times the loss or three times the unlawful gain, whichever is higher. Three times ₹40 lakh is ₹120 lakh, exceeding ₹30 lakh. The one crore ceiling applies only when loss or gain cannot be quantified.
- A₹1.2 crore, being three times the loss, as it is higherCorrect
- B₹30 lakh, being three times the gain
- C₹1 crore, the cap for the penalty
- D₹50 lakh, being loss plus gain
Explanation
Penalty is three times the loss (3 x 40 = ₹120 lakh) or three times the unlawful gain (3 x 10 = ₹30 lakh), whichever is higher, so ₹1.2 crore. The ₹1 crore cap applies only where loss or gain is not quantifiable.
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