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CS Professional · Compliance Management, Audit and Due Diligence · Relief and Remedies

The Central Government calls for information from Lotus Foods Pvt Ltd by an order under section 405. The company furnishes the data but it is materially incorrect. Under section 405 as stated, what is the penalty position for the company and officers in default?

The company and every officer in default are liable to a penalty of twenty thousand rupees, plus one thousand rupees for each day after the first during a continuing failure, up to a maximum of three lakh rupees. Section 405(4) covers materially incorrect or incomplete information as well as non-compliance.

  1. AImprisonment only, with no monetary penalty
  2. BPenalty of twenty thousand rupees, with a further one thousand rupees per day after the first for continuing failure, subject to a maximum of three lakh rupeesCorrect
  3. CFixed penalty of three lakh rupees imposed immediately
  4. DNo penalty because the information was actually furnished

Explanation

Section 405(4) penalises failure to comply and also furnishing information that is incorrect or incomplete in any material respect. The penalty is Rs 20,000 plus Rs 1,000 per day after the first for continuing failure, capped at Rs 3 lakh. It applies to the company and every officer in default. Furnishing data does not excuse material inaccuracy.

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