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CMA Final · Corporate and Economic Laws · Inspection, Inquiry and Investigation

The Tribunal makes an order under the section on freezing of assets of a company on inquiry and investigation. Which statement is correct?

The Tribunal can direct that transfer, removal or disposal not take place for a period not exceeding three years. If it is contravened, the company faces a fine of Rs 1 lakh to Rs 25 lakh, and officers in default face separate punishment. A creditor's complaint can also trigger it.

  1. AThe order may restrain transfer or disposal for a period not exceeding three years, and a company contravening it is fined Rs 1 lakh to Rs 25 lakhCorrect
  2. BThe order may last up to five years, and the company is fined up to Rs 5 lakh
  3. CThe order may last up to three years, and only officers in default are punished, not the company
  4. DThe order may restrain disposal only if the Central Government makes a reference, never on a creditor's complaint

Explanation

Section 221 allows the order for a period not exceeding three years. On contravention, the company is fined Rs 1 lakh to Rs 25 lakh and every officer in default faces up to three years' imprisonment or a fine of Rs 50,000 to Rs 5 lakh, or both. The Tribunal may also act on a complaint by a creditor with Rs 1 lakh outstanding.

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