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2019 (2) TMI 1885 - Tri - Companies LawCompounding of Offence - default in filing Cost Audit Reports in the prescribed Form I-XBRL with the Central Government under the provisions of Section 233 B of the Companies Act, 1956 read with the Companies (Cost Audit Report) Rules, 2011 for the Financial years 2011-12, 2012-13 and 2013-14 - Section 441 of the Companies Act, 2013 - HELD THAT - By the date of filing of this application before this Tribunal on 19.11.2018 the Companies (Amendment Ordinance, 2018) came into force i.e. on 2.11.2018 - In view of the amendment to the Section 441 of Companies Act which came into force with effect from 9.2.2018 this Tribunal can compound the offence punishable under various provisions of the Companies Act other than the offences punishable with imprisonment only or punishable imprisonment and with fine. Section 233B (11) provides punishment of fine only to the company which may extend to Five Thousand rupees and provide imprisonment or fine which may extend to Fifty Thousand or with both for every officer of the companies who is in default - Section 441 as amended with effect from 9.2.2018 gives power to this Tribunal to compound the default committed in respect of Section 233 B of the Companies Act i.e. non-filing of Cost Audit Reports by the Applicants within the given time. Section 441 only puts a restriction on the power of the 'Regional Director' and 'the authorised officers of the Central Government' permitting them to compound the offences wherein the maximum amount of fine does not exceed five lakh rupees and is punishable with 'fine only'. No such fetter has been put on powers of the Tribunal, which is the main forum for such compounding of offences, the other forum of 'Regional Director' and 'Officer of the Central Government' being alternative but restricted by extent of quantum of punishment. The Tribunal has the powers to compound all the offences irrespective of any pecuniary limit as evident from a bare perusal of Section 441. Coming to the case of the second applicant namely the Managing Director of the first applicant company punishment provided is imprisonment or fine or both. Where imprisonment is provided Regional Director has no jurisdiction to compound irrespective of fine amount - in respect of second applicant this Tribunal has got jurisdiction to compound the offences. In the case on hand the default is not punishable with imprisonment or with imprisonment and fine. It is only punishable with imprisonment or fine or both. Therefore, even though prosecution is pending without seeking permission from the concerned Court, this Tribunal can compound relying upon the aforesaid two judgments of the Hon'ble NCLT and the amended 441(6) of Companies Act, 2013. Quantum of compounding fee to be imposed - HELD THAT - The company has appointed a cost accountant and has got prepared the cost accounting report but could not file them in time due to technical reasons and the default has been made good. But the Company is having a turn over around rupees 211 Crores. Hence no need to take lenient view in imposing compounding fee - The punishment provided for the company for default in non-filing of Cost Audit Report under Section 233B (11) is maximum five thousand rupees and the punishment of fine provided for the Managing Director is fifty thousand rupees maximum. Application disposed off.
Issues Involved:
1. Compounding of offence under Section 441 of the Companies Act, 2013. 2. Default in filing Cost Audit Reports under Section 233B of the Companies Act, 1956. 3. Jurisdiction and authority of the Tribunal to compound offences. 4. Quantum of compounding fee to be imposed. Detailed Analysis: 1. Compounding of Offence under Section 441 of the Companies Act, 2013: The applicants, a company and its Managing Director, filed an application under Section 441 of the Companies Act, 2013, seeking compounding of offences under Section 233B of the Companies Act, 1956. The application was served on the Registrar of Companies (ROC), but no reply was filed by the ROC. The applicants admitted default in filing Cost Audit Reports for the financial years 2011-12, 2012-13, and 2013-14, attributing the delay to technical reasons beyond their control. 2. Default in Filing Cost Audit Reports under Section 233B of the Companies Act, 1956: The Central Government directed the company to audit cost records and file Cost Audit Reports per the Companies (Cost Audit Report) Rules, 2011. The company appointed M/s. S.K. Saxena Verma & Co. as Cost Auditors, who conducted the audits and submitted their reports. However, due to technical problems in the MCA portal, the reports could not be filed within the prescribed period. The company eventually filed the reports on 4th October 2017, after concerted efforts and follow-up with the c-Governance Cell of MCA. 3. Jurisdiction and Authority of the Tribunal to Compound Offences: The Tribunal noted that Section 441 of the Companies Act, 2013, as amended, allows the Tribunal to compound offences punishable with fine only, or with fine and imprisonment, except those punishable with imprisonment only. The Tribunal referred to judgments from the Hon'ble NCLAT and NCLT, which clarified that the Tribunal has the power to compound offences irrespective of the quantum of punishment and without the need for prior permission from the Special Court, except in cases where the offence is punishable with imprisonment only or with imprisonment and fine. 4. Quantum of Compounding Fee to be Imposed: Considering the company's turnover of approximately ?211 Crores and the fact that the default was due to technical reasons, the Tribunal decided not to take a lenient view in imposing the compounding fee. The maximum fine for the company under Section 233B(11) is ?5,000 per year, and for the Managing Director, it is ?50,000 per year. The Tribunal directed the company to pay a compounding fee of ?5,000 for each year and the Managing Director to pay ?50,000 for each year. The total compounding fee payable by the company and the Managing Director is ?15,000 and ?1,50,000, respectively. Conclusion: The Tribunal directed the applicants to remit the compounding fee to the relevant Head of Account of MCA within three weeks and report compliance before the Tribunal. The Tribunal's decision was based on the provisions of the Companies Act, 2013, as amended, and relevant judicial precedents, ensuring that the offences were compounded appropriately without causing prejudice to the interests of members, creditors, and other stakeholders dealing with the company.
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