2018 (11) TMI 1312 - Tri - Companies Law

Compounding of the offences committed under Section 135 r.w. Section 134(3)(o) of the Companies Act, 2013 - Held that - Company and its Officers who are in default have violated the provisions of Section 134(3)(o) r.w. Section 135 of the Companies Act, 2013, which is punishable under Section 134(8) of the Companies Act, 2013. The said offence is not intentional and it is not prejudicial to the interest of the shareholders or the creditors. The provisions of Section 134(8) of the Companies Act, 2013, provide that the Company shall be punishable with fine which shall not be less than fifty thousand rupees but which extend to twenty-five lakhs rupees, and every officer of the Company who is in default shall be punishable with imprisonment for a term which may extend to three years or with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees or with both. The Applicants i.e., Company and its two Officers, as mentioned above, are liable to be penalized under Section 134(8) of the Companies Act, 2013, for violation of the provisions of Section 134(3)(o) r.w. Section 135 of the Companies Act, 2013. The Applicants pleaded for taking lenient view on the ground that this is the first offence, which has been confirmed by the concerned RoC. Therefore, the Application of the Company and its Officers in default is allowed and the offence is compounded in exercise of the powers conferred under Section 441, by imposing a fine under Section 134(8) of the Companies Act, 2013, to the tune of ₹ 1,50,000/- i.e. ₹ 50,000 on each the Company, and its two Officers, who are in default viz., (1) Mr. Subramanian Vaithilingam (Director) (2) Mr. Subbiah Muthuvel (Director). The Company is directed to pay the penalty from its accounts but the two officers in default shall pay the penalty from their own resources. The Applicants shall comply with the Order within three weeks from the date, the Order is uploaded on the website of the NCLT.

Issues:
Compounding of offences under Section 135 r.w. Section 134(3)(o) of the Companies Act, 2013.

Analysis:
The judgment deals with an application filed under Section 441 of the Companies Act, 2013, for compounding of offences committed under Section 135 r.w. Section 134(3)(o) of the Companies Act, 2013. The application was filed by the Company and its Officers in default for failing to disclose details about Corporate Social Responsibility initiatives in the Board's reports. The Deputy Registrar of Companies confirmed it was the first offence with no pending prosecution against the Applicants. The Applicants argued that the disclosure was inadvertently missed due to the belief that it was not mandatory. The offence was deemed unintentional and not prejudicial to shareholders or creditors.

The provisions of Section 134(8) of the Companies Act, 2013, state the penalties for such offences, including fines and imprisonment for defaulting officers. The judgment found the Company and its Officers liable for violating Section 134(3)(o) r.w. Section 135 and thus subject to penalties under Section 134(8) of the Companies Act, 2013. Despite the violation, the Applicants requested leniency due to it being the first offence, which was confirmed by the Registrar of Companies.

In light of the circumstances, the Tribunal allowed the application for compounding the offence. A fine of ?1,50,000 was imposed, with ?50,000 each on the Company and its two Officers in default. The Company was directed to pay the penalty from its accounts, while the officers were instructed to pay from their own resources. Compliance with the Order was required within three weeks, and the Company had to file a copy of the Order with the Registrar of Companies, Chennai, within the specified time frame. The judgment concluded by disposing of the application, with the provision that a certified copy of the Order would not be issued until the fine was deposited as per the prescribed procedure.

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