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CS Executive · Capital Market and Securities Laws · Collective Investment Schemes

Under Section 15D of the SEBI Act, 1992, Orchid Land Fund sponsors a collective investment scheme without obtaining a certificate of registration from SEBI. The default continues for 400 days. Which statement on the penalty is correct?

The penalty is not less than one lakh rupees and may extend to one lakh rupees for each day of the default, subject to a maximum of one crore rupees. Because 400 days would exceed that, the Rs 1 crore ceiling in Section 15D(a) applies.

  1. APenalty up to Rs 1 lakh per day, with no overall ceiling
  2. BPenalty of not less than Rs 1 lakh but up to Rs 1 lakh per day, subject to a maximum of Rs 1 croreCorrect
  3. CPenalty of Rs 10,000 per day or Rs 10 lakh, whichever is higher
  4. DPenalty of Rs 5,000 per day, with a maximum of Rs 1 crore

Explanation

Section 15D(a) as it stands provides a penalty of not less than Rs 1 lakh but extending to Rs 1 lakh per day of the default, subject to a maximum of Rs 1 crore. At Rs 1 lakh per day, 400 days would give Rs 4 crore, but the cap holds it to Rs 1 crore. The Rs 10,000 or Rs 10 lakh formula is the older, substituted wording.

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