2018 (7) TMI 460 - Tri - Companies Law

Compounding of offence allegedly committed under section 203(1)(iii) of the Act - Held that - It is not in dispute that the Applicants have violated the provisions of section 203(1)(iii) of the Act as noticed by the Inspecting Officer in course of inspection of books of accounts and our records of the Company carried out under Section 206(5) of the Companies Act, 2013. Subsequently, the Company appointed Chief Financial Officer, Manager and Company Secretary on 23.08.2016 and it has also filed Form DIR-12 as confirmed by RoC, WB in his report dated 18.10.2017 and thus, the offence has been made good on 23.08.2016. So far as the company is concerned, the offence under section 203(1)(iii) of the Companies Act, 2013 has already been compounded under section 441 of the Companies Act, 2013 by this Tribunal, vide its orders dated 09.02.2018 and 05.04.2018 We are inclined to compound the violation under section 203(1)(iii) of the Companies Act, 2013 in terms of the provisions of section 441 of the Act. Accordingly, we do hereby compound the aforesaid offence against the Applicants subject to depositing the compounding fees by each of the applicants within 15 days hereof

Summary

Issues:
1. Compounding of offence under section 203(1)(iii) of the Companies Act, 2013.

Detailed Analysis:

Issue 1: Compounding of offence under section 203(1)(iii) of the Companies Act, 2013

The Company Application was filed under section 441 of the Companies Act, 2013 for compounding an offence allegedly committed under section 203(1)(iii) of the Act. The offence pertained to the non-appointment of a Chief Financial Officer (CFO) and the appointment of a single individual as Manager and Company Secretary during the financial year 2014-15. The Company responded to the show cause notice by stating that it had made efforts to appoint suitable candidates but faced challenges due to the nature of its operations. The Applicants, including ex-directors and an ex-manager, filed the compounding application after a show cause notice was issued by the Registrar of Companies, West Bengal.

The provisions of section 203(1)(iii) of the Companies Act, 2013 mandate the appointment of key managerial personnel, including a CFO. The penalty for contravening this section includes fines for the company and its officers in default. The compounding application was routed through the Registrar of Companies, West Bengal, who confirmed that the offence had been rectified by subsequent appointments. The compounding fees were determined separately for each applicant based on their tenure and association with the company.

The Tribunal had the power to compound the offence under section 441 of the Act, even after the initiation of prosecution. The Applicants had violated section 203(1)(iii) as noted during an inspection, but the breach was rectified by subsequent appointments. The Tribunal compounded the offence subject to the deposit of compounding fees by each applicant within a specified timeframe. The compounding fees were set based on individual associations with the company. The Tribunal directed the Applicants to remit the fees from their personal accounts, and the matter was disposed of accordingly.

In conclusion, the Tribunal compounded the violation under section 203(1)(iii) of the Companies Act, 2013, based on the circumstances and rectification of the offence by subsequent appointments. The Applicants were directed to deposit the compounding fees as determined within a specified timeframe, and appropriate action was to be taken by the Registrar of Companies, West Bengal as per the Tribunal's order.