2018 (9) TMI 1984 - AT - Companies Law

Quantum of fine and punishment - Compounding of offence - Section 165(6) of the Companies Act, 2013 - HELD THAT - The impugned order dated 28th March, 2018 has been passed by the Tribunal in contravention of Sub-section (6) of Section 165 of Companies Act, 2013, we set aside the impugned order. However, taking into consideration the facts and circumstances of the case, we impose minimum fine at the rate of five thousand rupees for every day after the first during which the contravention continued. The default having continued for 849 days w.e.f. 01st April, 2015 to 18th July, 2017, we quantify the penalty to ₹ 42,45,000/- to be paid by the Respondent/ Petitioner within a period of 45 days. Appeal allowed.

Summary

Issues:
Compounding of offence under Section 165(6) of Companies Act, 2013 - Reduction of fine below prescribed minimum.

Analysis:
The Respondent filed an application for compounding of an offence under Section 165(6) of the Companies Act, 2013, which was compounded by the National Company Law Tribunal, New Delhi Bench, reducing the fine to ?10 lakhs. The Tribunal justified this decision by stating that despite the prescribed minimum fine, it deemed it appropriate to direct compounding of the offence with the specified fee. The Company Prosecutor highlighted the provisions of Section 165(6) which mandate a minimum fine of ?5,000 per day for contravention. The Respondent argued that the penalty under this section is not mandatory. However, the Tribunal disagreed, stating that since the legislation prescribes a minimum fine, it cannot be reduced below that amount. The Tribunal noted that the default continued for 849 days, from April 1, 2015, to July 18, 2017, and the fine should have been between ?5,000 to ?25,000 per day.

The Company Prosecutor calculated the total fine based on the prescribed rates, amounting to ?42,45,000 for ?5,000 per day and ?2,12,25,000 for ?25,000 per day for the 849 days of default. Upon review, the Tribunal found that the impugned order was passed in contravention of Section 165(6) of the Companies Act, 2013, as the fine was reduced below the prescribed minimum. Consequently, the Tribunal set aside the impugned order and imposed a fine of ?42,45,000, considering the facts and circumstances of the case. The Respondent was directed to pay this amount within 45 days. The appeal was allowed with the above observations, and no costs were awarded.