2019 (8) TMI 271 - Tri - Companies Law

Compounding of default in compliance with the provisions of Sections 159 and 220 of the Companies Act, 1956 - non-filing of annual return and balance sheet and profit and loss account for the financial year 2013-14 - Applicants have pleaded that the default was committed only due to inadvertent mistake with no mala fide intentions on part of the Applicants and it is not likely to cause any prejudice to either the members of the Applicant Company or any other party. HELD THAT - The Registrar of Companies has filed a detailed report, a perusal of which shows that prosecution in relation to the offence has been filed and pending before the Hon'ble Tis Hazari Court. That no similar offence has been compounded during the last 3 years. It is further represented that the company has filed the Balance Sheet and Annual Return for the Financial Year ended 31.03.2016. Further, it is also represented by the RoC in the report that no complaint has been received against the Applicant Company and that there is no inspection or investigation proceeding pending against the Applicant Company. Since the offence is said to have been committed under the erstwhile provisions of companies Act, 1956, this Tribunal has the power to compound such like offences attendant with such like punishment as in the present one and even if prosecution is pending before Criminal Court and also taking into consideration the change in law on and from 09.02.2018 to Section 441 (1) as brought forth by companies Amendment Act, 2017 (1 of 2018) this Tribunal has the power to compound the offence as brought forth in this application. In relation to the provision above it is seen that the defaulter has made good the default - This Tribunal is of the view it will be fit and proper to impose the following fine on the applicant company aggregating in all to ₹ 865,600/- for the FY 2013-14. Subject to the remittance of the fine, the offence shall stand compounded - application disposed off.

Summary

Issues:
Compounding of default in compliance with Sections 159 and 220 of the Companies Act, 1956 for not filing annual return and balance sheet for the financial year 2013-14.

Analysis:
The petition was taken up as per the judgment of Hon'ble NCLAT, considering the Companies (Amendment) Ordinance, 2018. The Applicants sought compounding for default under Sections 159 and 220 of the Companies Act, 1956. The maximum fine for non-compliance with these sections was outlined in the Act. The Applicants claimed the default was inadvertent, with no malice, and rectified by filing the required documents after the offense. The Registrar of Companies (RoC) reported a pending prosecution, but no previous compounding in the last 3 years. The RoC confirmed no complaints or investigations against the Applicant.

The Tribunal considered the Applicant's plea, RoC's report, and a previous NCLAT judgment on imposing fines and compounding offenses. Referring to the Companies Act, 1956, and subsequent amendments, the Tribunal found the power to compound such offenses even if a prosecution is pending. The Tribunal noted the Applicant's rectification of the default and the prescribed punishment for non-filing of annual returns and accounts.

Consequently, the Tribunal imposed a fine of Rs. 865,600 on the Applicant company for the financial year 2013-14. The fine was detailed for each director involved, with a requirement for payment within three weeks from their personal accounts. Upon payment, the offense would be compounded, and the application was disposed of.