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CS Professional · Compliance Management, Audit and Due Diligence · Compliance Framework

Zenith Ltd. failed to spend its CSR amount of Rs 30 lakh for FY 2025-26. None of it relates to an ongoing project. It did not transfer the amount to a Schedule VII Fund. If the company is in default under section 135(5), what is the maximum penalty on the company and on each defaulting officer, using the official text?

The company faces Rs 60 lakh and each defaulting officer faces Rs 2 lakh. The company's penalty is twice the Rs 30 lakh, which is below the Rs 1 crore cap. The officer's one-tenth is Rs 3 lakh, but the Rs 2 lakh limit applies because it is lower.

  1. ACompany: Rs 60 lakh; officer: Rs 3 lakh
  2. BCompany: Rs 30 lakh; officer: Rs 3 lakh
  3. CCompany: Rs 60 lakh; officer: Rs 2 lakhCorrect
  4. DCompany: Rs 1 crore; officer: Rs 2 lakh

Explanation

Section 135(7) imposes on the company a penalty of twice the amount required to be transferred, or Rs 1 crore, whichever is less: 2 x 30 lakh = Rs 60 lakh, which is less than Rs 1 crore. For each officer in default it is one-tenth of the amount, or Rs 2 lakh, whichever is less: Rs 3 lakh against Rs 2 lakh gives Rs 2 lakh. The option with Rs 3 lakh forgets the Rs 2 lakh cap.

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