Mr A a Director purchased FloorTiles from the Marble Floor Ltd He holds Directorship in Marble ...........

Companies Act-Phase (I & II) Board-powersandMeetings

Mr. A a Director purchased FloorTiles from the Marble Floor Ltd. He holds Directorship in Marble Floor Ltd. The company extended credit to the Director which was not a policy of the

Company. The Auditors raised question saying that this was not permitted in the Companies Act. What shall be the penal provisions attracted by the defaulting Company ?

Fine : 1-5 Lakhs

Fine : 5-25 Lakhs

Fine : 1 Lakh

No penalty

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Explanation:

According to Sec 187 (4) If a company contravenes the provisions of this section, the company shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to twenty-five lakh rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees, or with both