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CMA Intermediate · Business Laws and Ethics · Directors - Role, Responsibilities, Qualification, Appointment, Removal, Remuneration and Powers

Sagar Textiles Ltd's Stakeholders Relationship Committee (SRC) could not resolve a security holder's grievance despite acting in good faith. Which statement is correct under Section 178?

Under the proviso to Section 178(8), the Stakeholders Relationship Committee's inability to resolve or consider a grievance in good faith does not amount to a contravention. So no fine or officer penalty applies merely because the grievance stayed unresolved.

  1. AThe company is automatically liable to a fine of at least one lakh rupees
  2. BInability to resolve or consider a grievance in good faith does not constitute a contravention of the sectionCorrect
  3. COnly the SRC chairperson is liable to a penalty
  4. DThe grievance must be referred to the NRC, failing which the company is in default

Explanation

The proviso to Section 178(8) says that inability to resolve or consider any grievance by the SRC in good faith is not a contravention. Hence no fine or penalty follows. The NRC has no role in grievances; these are the SRC's task under Section 178(6).

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