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CMA Final · Corporate and Economic Laws · Board of Directors and Key Managerial Personnel

Under Section 102, a director of Ganga Infra Ltd. fails to disclose an interest in a special business item, and his relative gains a benefit of Rs 4,00,000 as a result. What is the penalty on the director for the default, without prejudice to holding the benefit in trust?

The penalty is Rs 50,000 or five times the benefit accruing to the director or any relative, whichever is higher. Five times Rs 4,00,000 equals Rs 20,00,000, which is higher than Rs 50,000, so the penalty is the larger amount, besides holding the benefit in trust.

  1. ARs 50,000 only
  2. BRs 50,000 or Rs 4,00,000, whichever is higher
  3. CRs 50,000 or Rs 20,00,000, whichever is higherCorrect
  4. DRs 5,00,000 only

Explanation

Section 102(5) imposes a penalty of fifty thousand rupees or five times the benefit accruing to the promoter, director, manager or KMP or any relative, whichever is higher. Five times Rs 4,00,000 is Rs 20,00,000, which exceeds Rs 50,000. Using the benefit itself is the multiplier mistake.

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