2003 (11) TMI 334 - HC - Companies Law

Summary

Issues Involved:
1. Whether the present appeal is maintainable?
2. Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?
3. Whether the order passed by the Company Law Board could be said to be a non-speaking order and, therefore, bad?

Issue-wise Detailed Analysis:

Issue No. (i): Whether the present appeal is maintainable?

The respondent contended that the appeal was not maintainable as the appellant, a shareholder, was not an aggrieved person by the Company Law Board's decision. Section 621A of the Companies Act allows the Company Law Board and the Regional Director to compound offences, except those punishable with imprisonment only or with imprisonment and also with fine. Section 621(1) states that no court shall take cognizance of any offence under the Act except on the complaint of the Registrar, a shareholder, or a person authorized by the Central Government. The appellant argued that the Company Law Board's compounding of the offence deprived him of his right under section 621, making him an aggrieved person. The court found merit in this argument, noting that the appellant raised significant legal questions and could have filed a complaint under section 621. Thus, the court held that the appeal was maintainable.

Issue No. (ii): Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?

This issue required interpreting sections 621A(1) and 621A(7). The appellant argued that section 621A(1) is controlled by section 621A(7), which requires court permission for compounding offences punishable with imprisonment or fine or both. The respondent contended that these sections are independent, providing parallel powers to the Company Law Board and the criminal court. The court examined the provisions and concluded that section 621A(1) empowers the Company Law Board to compound certain offences before or after prosecution, while section 621A(7) applies only after prosecution is instituted. Both sections start with "notwithstanding anything contained in the Code of Criminal Procedure," indicating independent powers. The court found that the Company Law Board's power to compound offences is not subject to section 621A(7) and can be exercised even after prosecution is instituted. The court cited Hoffland Finance Ltd., where the Company Law Board held that it could compound offences independently of the criminal court. Thus, the court held that the Company Law Board's power to compound offences was legal and valid.

Issue No. (iii): Whether the order passed by the Company Law Board could be said to be a non-speaking order and, therefore, bad?

The appellant argued that the Company Law Board's order lacked reasoning. The court disagreed, noting that the order considered section 621A and was satisfied that the circumstances justified compounding the offence. The court held that the Company Law Board's exercise of power was proper and the order could not be questioned for lacking reasons.

Conclusion:

The court dismissed the appeal, holding that the appellant had locus standi, the Company Law Board had the power to compound the offence without court permission, and the order was not a non-speaking order. The appeal was dismissed without costs.