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CS Professional · Corporate Restructuring, Valuation and Insolvency · Voluntary Liquidation

Hooghly Chemicals Ltd begins voluntary liquidation, but evidence shows the directors did so intending to defraud a supplier. What consequence does the Code provide for the person who initiated it?

The Adjudicating Authority may impose a penalty of at least Rs 1 lakh and up to Rs 1 crore on a person who initiates voluntary liquidation with intent to defraud. The power is discretionary and rests with the Adjudicating Authority, not the Registrar.

  1. AThe Adjudicating Authority may impose a penalty of not less than Rs 1 lakh, extending to Rs 1 croreCorrect
  2. BA fixed penalty of Rs 10 lakh applies automatically
  3. COnly imprisonment applies, with no monetary penalty
  4. DThe Registrar must impose a penalty up to Rs 25 lakh

Explanation

Section 65(2) lets the Adjudicating Authority penalise any person who initiates voluntary liquidation with intent to defraud, with a penalty between Rs 1 lakh and Rs 1 crore. It is discretionary, imposed by the Adjudicating Authority, not the Registrar, and is not a fixed amount.

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