1997 (5) TMI 435 - Board - Companies Law

Summary

Issues Involved:
1. Whether the Company Law Board (CLB) can compound offences under Section 621A of the Companies Act, 1956, without obtaining prior permission from the criminal court where prosecution is pending.
2. Interpretation and application of Section 621A of the Companies Act, 1956, particularly Sub-section (7).

Detailed Analysis:

1. Whether the Company Law Board (CLB) can compound offences under Section 621A of the Companies Act, 1956, without obtaining prior permission from the criminal court where prosecution is pending:

The key issue in this case was whether the CLB could compound offences under Section 621A of the Companies Act, 1956, without first obtaining permission from the criminal court where the prosecution was pending. The judgment noted the conflicting views from different regional benches of the CLB. The Western Region Bench in Reliance Industries Ltd., In re [1997] 89 Comp Cas 67, held that the question of seeking permission of the court arises only after compounding by the CLB. Conversely, the Northern Region Bench required obtaining permission from the criminal court before compounding.

2. Interpretation and application of Section 621A of the Companies Act, 1956, particularly Sub-section (7):

The judgment provided an in-depth analysis of Section 621A. It emphasized that Sub-section (1) of Section 621A allows the CLB to compound offences punishable with fine or imprisonment or both, without mentioning the need for court permission. Sub-section (7) of Section 621A, however, states that offences punishable with imprisonment or fine or both shall be compoundable "with the permission of the court," following the procedure in the Criminal Procedure Code (CrPC).

The judgment highlighted the procedural differences between the Companies Act and the CrPC. Under the Companies Act, the CLB decides on compounding applications, while under the CrPC, the complainant or injured person applies to the court for compounding. The judgment reasoned that requiring court permission for CLB compounding would create jurisdictional conflicts and procedural impracticalities, especially when no prosecution is pending.

The judgment clarified that the CLB's discretion to compound offences under Sub-section (1) is independent of Sub-section (7). The CLB's decision to compound is final and subject only to an appeal to the High Court. The judgment concluded that the CLB does not need to obtain prior or subsequent permission from the criminal court for compounding offences under Section 621A(1).

Conclusion:

The judgment held that the CLB could compound offences under Section 621A(1) without obtaining prior permission from the criminal court, even if prosecution is pending. The CLB's jurisdiction to compound is independent of the court's jurisdiction under Sub-section (7). The case was referred back to the learned Member of the Northern Region Bench to decide on the merits of the compounding application.