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CS Professional · Corporate Restructuring, Valuation and Insolvency · Insolvency

An insolvency professional's contravention yielded an unlawful gain, but neither the loss to others nor the gain can be quantified. The disciplinary committee wants to impose a monetary penalty. Which statement is correct?

The total penalty cannot exceed one crore rupees. Where the loss or unlawful gain cannot be quantified, the proviso to section 220(3) caps the penalty at that amount, since the three-times formula cannot be applied. Penalty is still permitted and is not unlimited.

  1. ATotal penalty cannot exceed one crore rupeesCorrect
  2. BTotal penalty must be exactly three crore rupees
  3. CNo penalty can be imposed, only suspension
  4. DPenalty is unlimited at the committee's discretion

Explanation

The proviso to section 220(3) states that where loss or unlawful gain is not quantifiable, the total penalty shall not exceed one crore rupees. The three-times formula cannot be applied without a quantified amount, yet penalty remains possible.

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