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CS Professional · Corporate Restructuring, Valuation and Insolvency · Insolvency

The Board finds that an insolvency professional's contravention caused a quantifiable loss of Rs 40 lakh to creditors, while the professional made an unlawful gain of Rs 10 lakh. The disciplinary committee finds sufficient cause and decides to impose a monetary penalty. What is the penalty applicable under section 220(3)?

The penalty is Rs 120 lakh. Section 220(3) fixes it at three times the loss or three times the unlawful gain, whichever is higher. Three times Rs 40 lakh loss is Rs 120 lakh, exceeding Rs 30 lakh from the gain.

  1. ARs 30 lakh, being three times the unlawful gain
  2. BRs 1 crore, being the fixed ceiling
  3. CRs 120 lakh, being three times the lossCorrect
  4. DRs 50 lakh, being the sum of loss and gain

Explanation

Three times the loss is Rs 120 lakh and three times the gain is Rs 30 lakh. The penalty is whichever is higher, so Rs 120 lakh. The Rs 1 crore cap applies only where loss or gain is not quantifiable.

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