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CS Professional · Compliance Management, Audit and Due Diligence · Non-Compliances, Penalties and Adjudications

Zenith Tools Pvt Ltd is recognised as a start-up company. A provision of the Companies Act, 2013 prescribes a penalty of Rs 3,00,000 on the company for a particular non-compliance. Under the lesser-penalty provision, what is the maximum penalty that can be imposed on the company?

The maximum penalty is Rs 1,50,000. For a start-up company, the penalty cannot exceed one-half of the specified penalty, subject to a ceiling of Rs 2 lakh for a company. Half of Rs 3 lakh is Rs 1.5 lakh, which is within the ceiling.

  1. ARs 3,00,000
  2. BRs 1,50,000Correct
  3. CRs 2,00,000
  4. DRs 1,00,000

Explanation

Section 446B caps the penalty at one-half of the penalty specified, subject to a maximum of Rs 2 lakh for a company. Half of Rs 3,00,000 is Rs 1,50,000, which is below Rs 2 lakh, so Rs 1,50,000 applies. Rs 2,00,000 would be right only if half exceeded that cap.

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