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CMA Intermediate · Business Laws and Ethics · Key Managerial Personnel

Meera, a KMP of Zenith Ltd., fails to disclose her interest in an item of special business in the explanatory statement to a general meeting notice. As a result her relative gains a benefit of Rs 4,00,000. What is the minimum penalty she faces under Section 102(5), in addition to holding the benefit in trust for the company?

The penalty is fifty thousand rupees or five times the benefit accruing, whichever is higher. Five times Rs 4,00,000 is Rs 20,00,000, which exceeds Rs 50,000, so the penalty is Rs 20,00,000. She must also hold the benefit in trust for the company.

  1. ARs 50,000
  2. BRs 2,00,000
  3. CRs 20,00,000Correct
  4. DRs 5,00,000

Explanation

Section 102(5) imposes the higher of Rs 50,000 or five times the benefit. Five times Rs 4,00,000 is Rs 20,00,000, which is higher than Rs 50,000. Choosing Rs 50,000 ignores the 'whichever is higher' rule.

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