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CS Professional · Corporate Restructuring, Valuation and Insolvency · Liquidation on or after Failing of Resolution Plan

Kaveri Steels Ltd is under a moratorium declared under section 14. Its finance director, Mr. Rao, knowingly permits assets of the company to be transferred in breach of the moratorium. Under section 74(1), what is the punishment for such an officer?

The officer faces imprisonment of not less than three years but up to five years, or a fine of not less than one lakh and up to three lakh rupees, or both. This is the section 74(1) penalty for officers of the corporate debtor violating the moratorium.

  1. AImprisonment of at least one year, up to five years, or fine of at least one lakh rupees up to one crore rupees, or both
  2. BImprisonment of at least three years, up to five years, or fine of at least one lakh rupees up to three lakh rupees, or bothCorrect
  3. CImprisonment of at least six months, up to one year, or fine up to one lakh rupees only
  4. DFine of at least one lakh rupees up to three lakh rupees only, without imprisonment

Explanation

Section 74(1) covers a corporate debtor's officer who knowingly or wilfully committed, authorised or permitted violation of section 14: imprisonment from three to five years, or fine from one lakh to three lakh rupees, or both. The first option is the penalty for creditors under section 74(2) or for plan breach under 74(3), so it is wrong here.

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