Skip to content

CS Professional · CSR and Social Governance · Corporate Social Responsibility

Sabarmati Steel Ltd defaulted on transferring Rs 30 lakh to a Schedule VII Fund as required under section 135(5). Applying section 135(7), what penalty applies to the company and to each officer in default?

The company's penalty is the lesser of twice the amount or Rs 1 crore, so Rs 60 lakh. Each defaulting officer pays the lesser of one-tenth of the amount or Rs 2 lakh; one-tenth is Rs 3 lakh, so the penalty is Rs 2 lakh.

  1. ACompany Rs 60 lakh (twice the amount, below Rs 1 crore); each defaulting officer Rs 2 lakh (one-tenth is Rs 3 lakh, capped at Rs 2 lakh)Correct
  2. BCompany Rs 1 crore; each officer Rs 3 lakh
  3. CCompany Rs 30 lakh; each officer Rs 3 lakh
  4. DCompany Rs 60 lakh; each officer Rs 3 lakh

Explanation

Company penalty is twice the amount or Rs 1 crore, whichever is less: twice Rs 30 lakh is Rs 60 lakh, which is below Rs 1 crore. Officer penalty is one-tenth of the amount or Rs 2 lakh, whichever is less: one-tenth is Rs 3 lakh, so the Rs 2 lakh cap applies. Applying the cap only to the company, or none to the officer, is wrong.

Did you get it right without looking?

One question tells you little. A timed set on Corporate Social Responsibility shows your real accuracy, how long you take and where you lose marks.

Practise Corporate Social ResponsibilityFree diagnostic mock

More Corporate Social Responsibility questions