2017 (3) TMI 752 - Tri - Companies Law

Compounding of offences arising out of various defaults and non- compliance of statutory requirements - Held that - There is merit in the arguments advanced by the Ld. Counsel for the SFIO that non-adherence to the statutory requirements under the Companies Act were intentional and deliberate. In certain cases of prosecution for an offence under the Companies Act, the defaults are sometimes rectified and compounding such defaults would have no effect on any criminal prosecution. However, in the present cases, the defaults are incurable and cannot be rectified. Compounding of these offences would demolish and prejudice the prosecution under the Penal provisions also. Given the circumstances, find that the present prayers for compounding in all these petitions cannot be permitted, as these were not due to any bonafide omission or a delayed rectification of a statutory requirement. The offences herein under the Companies Act and those under the Penal Code are intrinsically linked and incurable. Compounding of the offences under the Companies Act would hamper the Criminal Prosecutions and no accused should be allowed to get away with deliberate large scale bungling and fabrication of documents carried out with criminal intention. Petitioner/applicant is not entitled to compounding of the offences under the Companies Act.

Summary

Issues:
Compounding of offences under the Companies Act, intentional and deliberate non-adherence to statutory compliances, impact of compounding on criminal prosecutions, discretion of the Tribunal in compounding offences, deliberate fabrication of documents leading to fraud.

Analysis:
The judgment pertains to five Company petitions filed under section 621A of the Companies Act, 1956 seeking compounding of offences due to defaults and non-compliance of statutory requirements by a Public Ltd. Company. The company in question, a subsidiary of a foreign holding, faced various violations under multiple sections of the Companies Act during the tenure of the Managing Director. Prosecution was initiated against the company and individuals for these defaults, with criminal prosecution launched by the SFIO for serious offences including fraud and falsification of documents. The investigations revealed deliberate manipulation of sales, falsification of accounts, and acceptance of deposits in violation of the law.

The Tribunal highlighted that the discretion to compound offences under the Companies Act should be exercised for inadvertent technical aberrations, with fines imposed for genuine mistakes to avoid lengthy trials. Imprisonment is an alternative for deliberate and malafide offences. In this case, investigations showed deliberate and malafide non-compliance with statutory requirements, involving fabrication of documents and fraud in collusion with others. The SFIO opposed compounding, emphasizing the intentional nature of the violations.

The judgment emphasized that compounding should not be allowed when offences are deliberate and linked to criminal prosecutions, as it could prejudice the criminal cases. The deliberate large-scale fabrication of documents with criminal intent should not be condoned through compounding under the Companies Act. The court rejected the prayers for compounding in all five petitions, as the offences were intentional and incurable, impacting the ongoing criminal prosecutions. Consequently, all five Company petitions were dismissed, and the order was to be placed in each petition's record.