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CS Professional · Compliance Management, Audit and Due Diligence · Signing and Certification

Zenith Polymers Pvt Ltd, a recognised start-up company, contravenes a provision for which the Act prescribes a penalty of Rs 3,00,000 on the company and Rs 80,000 on each officer in default. Applying the lesser-penalty rule for start-ups, what is the maximum penalty on the company and on each officer in default?

The company can be penalised up to Rs 1,50,000 and each officer in default up to Rs 40,000. A start-up company pays not more than half the specified penalty, subject to caps of Rs 2 lakh for the company and Rs 1 lakh for an officer, and both halves fall below those caps.

  1. ACompany Rs 1,50,000; officer Rs 40,000Correct
  2. BCompany Rs 2,00,000; officer Rs 80,000
  3. CCompany Rs 3,00,000; officer Rs 80,000
  4. DCompany Rs 1,50,000; officer Rs 1,00,000

Explanation

Section 446B caps the penalty at one-half of the specified penalty, subject to Rs 2 lakh for a company and Rs 1 lakh for an officer. Half of 3,00,000 is 1,50,000, below the Rs 2 lakh cap. Half of 80,000 is 40,000, below the Rs 1 lakh cap. Option B ignores the one-half rule for the officer and applies the cap instead.

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