2019 (6) TMI 135 - Tri - Companies Law

Compounding of offences - alleged violation of Section 217(1) of the Companies Act, 1956 - HELD THAT - By perusal of the material available on record, the alleged contravention seems to be technical in nature and due to some procedural lapses on the part of its directors for not enclosing board's report along with the company's balance sheet as on 31.03.2011. However, the applicants have now attached the Board's Report for the Financial Year 2010-2011 along with this compounding application. Thus, they have made good of alleged lapses. The applicants have further explained that non-attaching of Board's Report of the Company with the Balance Sheet was erroneous, but without having any wrongful intention to its Directors. Thus, it may be seen that the applicants have admitted their default, but has sought compounding of offence. The present application deserves to be allowed as the alleged offence is made compoundable and can be compounded well by this Court, because it is made punishable with imprisonment up to six months or with fine alone or with both. The present Company Petition is conditionally allowed and stands disposed of.

Issues:
Violation of Section 217(1) of the Companies Act, 1956 - Compounding of Offences

Analysis:
1. The present case involves Directors of a company who filed an Application for compounding of offences against them for alleged violation of Section 217(1) of the Companies Act, 1956.
2. The Registrar of Companies forwarded the Application to the National Company Law Tribunal to be decided on its merits, registered as Company Petition No. 32/441/NCLT/AHM/2018.
3. The applicants explained that the violation was unintentional, as the Board's Report for the relevant financial year was not attached to the Balance Sheet due to a procedural lapse.
4. The applicants referred to the penal provisions under Section 217(5) of the Companies Act, 1956, which prescribes punishment for non-compliance.
5. The applicants sought compounding of the offence under Section 441 of the Companies Act, 2013, which allows compounding of offences punishable with a fine.
6. The Registrar of Companies submitted a report acknowledging the default and the compounding application, recommending consideration by the Tribunal.
7. The Tribunal considered the period of default and the provisions of Section 621A of the Companies Act, 1956, empowering it to compound offences.
8. After hearing submissions, the Tribunal noted the technical nature of the contravention and the applicants' efforts to rectify the lapse by attaching the Board's Report with the compounding application.
9. The Tribunal found the application deserving of approval as the offence was compoundable and could be compounded by the Court.
10. Consequently, the Tribunal conditionally allowed the Company Petition, permitting the Petitioners to compound the offence by depositing compounding fees with the Registrar of Companies.
11. The specified amounts were to be paid within four weeks, failing which appropriate action, including prosecution, would be initiated.
12. Failure to comply with the payment deadline would lead to further action by the Registrar of Companies under applicable law.
13. The Company Petition was conditionally allowed and disposed of, with directions for necessary compliance by the Petitioners and the Registrar of Companies.
14. The Registry was instructed to communicate the order to the concerned parties for compliance.

This detailed analysis covers the issues involved in the legal judgment regarding the violation of Section 217(1) of the Companies Act, 1956 and the subsequent compounding of offences by the National Company Law Tribunal.

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