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CS Professional · Banking and Insurance - Laws and Practice · Functions in Insurance and Compliance related thereto (Part I)

IRDAI pending a representation under section 34B finds that delay would harm policyholders awaiting claim settlements. It directs a director not to act as such pending consideration. The director defies the order for 40 days. What is the maximum penalty under section 34B(4) as reproduced (Rs 1 lakh per day or Rs 1 crore, whichever is less)?

Rs 40 lakh. The penalty is Rs 1 lakh for each day of contravention or Rs 1 crore, whichever is less. For 40 days the daily computation gives Rs 40,00,000, which is lower than the Rs 1 crore ceiling, so it applies.

  1. ARs 40 lakhCorrect
  2. BRs 1 crore
  3. CRs 4 lakh
  4. DRs 40,000

Explanation

Penalty is Rs 1,00,000 per day of continuing contravention, capped at Rs 1 crore, whichever is less. 40 days x Rs 1,00,000 = Rs 40,00,000, which is below Rs 1 crore. Rs 1 crore applies only if the daily total exceeds it, which needs over 100 days.

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