2014 (4) TMI 1021 - HC - Companies Law

Compounding of offense u/s 25(8) and Section 192 of the Companies Act, 1956 - Special Resolution passed at Extraordinary General Body Meeting (EOGM) of the company not been filed with the Registrar of Companies, within the period of 30 days of passing the same - Held that - Appellant cannot be aggrieved by the impugned order of the Company Law Board compounding certain defaults which are voluntarily disclosed by the company. It is also not in dispute that the Resolution passed in the 36th EOGM had not been registered. Thus, admittedly a default under Section 192 had occurred and the same has been compounded. The appellant cannot make any grievance in this regard. The appellant also cannot be aggrieved by compounding of an alleged offense under Section 25 as it is the case of the appellant that no such offense had occurred. The principal grievance of the appellant is not against the compounding of the alleged offences but against the introduction of a new set of Articles of Association, which the appellant contends is without due sanction of the members of the company. It is not necessary in these proceedings to adjudicate whether a new set of Articles of Association has been filed or whether the same has the approval of the members of the respondent company. The appellant is at liberty to raise such contentions in appropriate proceedings. It is open for the appellant to institute such action as may be advised to challenge the set of Articles which will be considered by the appropriate forum completely uninfluenced by the impugned order passed by the Company Law Board. This clarification would adequately protect the appellant as the impugned order cannot not be considered as legitimising any action of the company which may otherwise be unlawful. The import of the impugned order is only to compound the specified defaults, if any, under the Act. - Decided against the appellant.

Summary

Issues:
Appeal against Company Law Board order under Section 10F of the Companies Act, 1956 compounding defaults under Section 25(8) and Section 192 of the Act.

Analysis:
1. The Company Law Board allowed the compounding application for defaults under Section 25(8) and Section 192 of the Companies Act, 1956, for the financial years 2002-03 to 2013-2014. The Board imposed penalties on the respondent company and its officers for the said defaults. The application sought to rectify the failure to file a Special Resolution with the Registrar of Companies within the required period and the non-compliance with the provision requiring Central Government approval for modifications in the Articles of Association.

2. The appellant raised concerns regarding the legitimacy of certain actions taken by the company under the guise of the compounding application. The appellant contended that the amended Articles of Association, not approved by the company, were being introduced improperly. Additionally, the appellant argued that no offence under Section 25(8) occurred since Central Government permission is required only for altering the object clause of the Memorandum of Association, not for introducing new Articles of Association.

3. The appellant's primary grievance was against the introduction of a new set of Articles of Association without proper approval from the members of the company. The Court held that the compounding of disclosed defaults by the company, including the unregistered Resolution from the Extraordinary General Body Meeting, was not a valid basis for the appellant's grievance. The appellant was advised to challenge the new set of Articles in separate proceedings if necessary, as the impugned order only aimed to compound specific defaults under the Act.

4. The Court clarified that the impugned order did not legitimize any potentially unlawful actions of the company, specifically regarding the introduction of new Articles of Association. The appellant was granted the liberty to challenge the approval of the new Articles in appropriate proceedings, ensuring that the impugned order's scope was limited to compounding specified defaults. Consequently, the appeal and all pending applications were disposed of with this clarification.