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CS Professional · Corporate Restructuring, Valuation and Insolvency · Application for Corporate Insolvency Resolution Process

Ravi, a director of Orchid Foods Ltd, diverts funds to defraud creditors after the pre-packaged insolvency commencement date. Under section 67A, what can the Adjudicating Authority do on the resolution professional's application?

The Adjudicating Authority, on the resolution professional's application, may impose a penalty on the officer of not less than one lakh rupees and up to one crore rupees, because section 67A penalises fraudulent management of the debtor's affairs after the pre-packaged commencement date.

  1. AImpose a penalty of not less than one lakh rupees, extending up to one crore rupees, on the officerCorrect
  2. BImpose a fixed penalty of ten lakh rupees only
  3. COrder imprisonment of the officer for up to five years
  4. DImpose a penalty not exceeding one lakh rupees

Explanation

Section 67A lets the Adjudicating Authority, on an application by the RP, penalise an officer who manages the debtor's affairs with intent to defraud creditors or for any fraudulent purpose, with a penalty of at least one lakh and up to one crore rupees. It prescribes a range, not a fixed sum, a cap of one lakh or imprisonment.

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