2018 (3) TMI 1292 - Tri - Companies Law

Compounding of offences - joint application of default - Held that - Since all the five applications as listed above pertains to default in relation to filing of Annual Returns which is required to be filed for each year and the default is in relation to more than a year and as the same offence had been committed for the second or subsequent occasions within a period of three years and as the defaulted section being section 92 provides for fine or imprisonment or with both, for the officers in default thereby making it virtually non-compoundable by virtue of operation of section 451 read with section 441(6) of the Companies Act, 2013 this Tribunal does not have jurisdiction to compound the offence as dealt with in detail under Issue No.3 supra. (b) Further a joint application for the default committed under the 1956 Act as well as 2013 Act filed is also not maintainable in view of the position as enunciated and dealt with under Issue No.4 supra. (c) In any case under the 2013 Act since the maximum amount of fine prescribed for the offence of not filing annual returns is not in excess of five lakh rupees, this Tribunal lacks the pecuniary jurisdiction to entertain the compounding applications as listed above

Issues Involved:
1. Determination of the maximum amount of fine for compounding authority.
2. Maintainability of joint applications for compounding.
3. Maintainability of joint applications for yearly compliance defaults.
4. Maintainability of common applications for non-compliance under both the 1956 Act and the 2013 Act.

Detailed Analysis:

Issue 1: Determination of the Maximum Amount of Fine for Compounding Authority
The Tribunal examined whether the maximum fine for determining the compounding authority should be based on the fine prescribed solely for the defaulting company or the aggregate fines for both the company and its officers. It concluded that the jurisdiction should be based solely on the maximum fine prescribed for the defaulting company. This approach avoids confusion and maintains consistency with the legislative intent. The Tribunal outlined that for offences where the maximum fine exceeds ?5 lakh, the Tribunal has jurisdiction, while for fines not exceeding ?5 lakh, the Regional Director is the appropriate authority.

Issue 2: Maintainability of Joint Applications for Compounding
The Tribunal noted that Section 441 of the Companies Act, 2013, does not explicitly provide for joint applications for compounding. Rule 23A of the NCLT Rules allows joint petitions only if they have a common interest and are specifically permitted by the Act. The Tribunal emphasized that joint applications cannot be filed carte blanche and must be considered on a case-by-case basis. For example, in CP-16/144/ND/2017, the Tribunal found no common cause of action for all applicants, thus deeming the joint application inappropriate. The Registrar of Companies must forward applications based on the maximum fine prescribed for the defaulting company alone.

Issue 3: Maintainability of Joint Applications for Yearly Compliance Defaults
The Tribunal held that joint applications for defaults in yearly compliance, such as filing annual returns or holding AGMs, are not maintainable. Each year’s default is distinct and cannot be combined into a single application. Section 451 of the Companies Act, 2013, mandates stricter penalties for repeated defaults, making such offences non-compoundable. The Tribunal clarified that repeated defaults within three years attract double fines and imprisonment, thus falling outside the purview of compounding.

Issue 4: Maintainability of Common Applications for Non-Compliance Under Both the 1956 Act and the 2013 Act
The Tribunal ruled that joint applications for offences spanning both the 1956 Act and the 2013 Act are not maintainable due to differences in the penalty structures under each Act. For instance, in CP-16/126/ND/2017, the default in filing annual returns involved penalties under both Acts, leading to jurisdictional complications. The Tribunal emphasized that such applications cannot harmonize the distinct legal frameworks of the two Acts.

Judgment Summary:
The Tribunal dismissed several applications due to non-maintainability based on the issues discussed. For instance, applications like CP-16/176/ND/2017 and CP-16/181/ND/2017 were dismissed because the defaults involved repeated offences under Section 92, making them non-compoundable. Similarly, applications involving defaults under Section 137 were dismissed for being non-maintainable due to repeated yearly defaults.

Applications such as CP-16/178/ND/2017 and CP-16/182/ND/2017 were dismissed as joint applications for repeated defaults in holding AGMs were not maintainable. Applications like CP-16/133/ND/2017 were directed to the Regional Director as the fine did not exceed ?5 lakh.

The Tribunal provided detailed guidelines for the Registrar of Companies on forwarding applications based on the maximum fine prescribed for the defaulting company, ensuring clarity and consistency in the compounding process.

← Previous Next →