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of <h1>Shareholders Face Penalties for Frivolous Lawsuits Under Section 625 of the Companies Act, 1956.</h1> Section 625 of the Companies Act, 1956, addresses compensation in cases of frivolous or vexatious prosecution by a shareholder against a company or its officers. If a Magistrate acquits the accused and deems the accusation false and frivolous or vexatious, the shareholder may be required to pay compensation up to one thousand rupees. Failure to pay can result in up to two months of simple imprisonment. This section does not exempt the shareholder from other liabilities, and compensation paid is considered in subsequent civil suits. The shareholder can appeal the compensation order, and payment is withheld until the appeal period expires or is resolved.
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