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Orion Foods Ltd defaults on transferring Rs 20 lakh to a Schedule VII Fund as required under section 135(5). What penalty does section 135(7) prescribe for the company?

The company is liable to a penalty of twice the amount not transferred or Rs one crore, whichever is less. Twice Rs 20 lakh is Rs 40 lakh, which is lower, so the penalty is Rs 40 lakh. Officers in default face the separate one-tenth or Rs two lakh formula.

  1. ARs 20 lakh, equal to the amount
  2. BTwice the amount, Rs 40 lakh, or Rs one crore, whichever is lessCorrect
  3. CTwice the amount, Rs 40 lakh, or Rs one crore, whichever is more
  4. DOne-tenth of the amount, or Rs two lakh, whichever is less

Explanation

Section 135(7) imposes on the company a penalty of twice the amount required to be transferred or one crore rupees, whichever is less. Twice Rs 20 lakh is Rs 40 lakh, which is below Rs one crore, so Rs 40 lakh applies. The one-tenth or Rs two lakh formula applies to defaulting officers, not the company.

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