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CS Professional · Corporate Restructuring, Valuation and Insolvency · Insolvency

An insolvency professional earned an unlawful gain of Rs 25 lakh through a contravention, which also caused identifiable loss directly attributable to a particular creditor. The Board has directed disgorgement. Which statement is correct under section 220?

Disgorgement equals the unlawful gain, here Rs 25 lakh, and applies notwithstanding the penalty provision. The Board may provide restitution from it only to an identifiable person whose loss is directly attributable to the contravention, so it is not mandatory for all creditors.

  1. ADisgorgement is possible only if no penalty is imposed
  2. BDisgorgement is of an amount equal to the unlawful gain, and the Board may provide restitution from it to the identifiable person whose loss is directly attributableCorrect
  3. CDisgorgement must equal three times the gain, with all of it paid to the creditor
  4. DRestitution is mandatory for every creditor of the corporate debtor

Explanation

Section 220(4) allows disgorgement of an amount equivalent to the unlawful gain, notwithstanding the penalty in 220(3). Under 220(5), restitution may be given only if the sufferer is identifiable and the loss is directly attributable to that person.

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