2019 (8) TMI 718 - AT - Companies Law

Penalty for non preparation filing of Cost Audit Report in time - initiation of prosecution u/s 233B(11) of the Companies Act, 1956 - NCLT allowed application for compounding with equal fine on company directors - HELD THAT - There is substance in the argument of the learned Counsel for the Appellants that the Company and the Directors have not been treated equally. Impugned order maintained with regard to imposing of fine under Section 148(8) for FY 2014 2015 and 2015 2016 and substitute 40,000 in place of 2,00,000 with regard to the Directors/Officers, i.e. present Appellants No.2 to 5 - rest order maintained - appeal allowed in part.

Summary

Issues:
Violation of Sections 233B and 148 of the Companies Act, 1956 and 2013; Discrepancy in fines imposed on the company and its directors; Equality in treatment of company and directors.

Analysis:

1. Violation of Sections 233B and 148:
The appeal arose from an order by the National Company Law Tribunal (NCLT) regarding the delay in filing Cost Audit Reports for various financial years. The company faced prosecution under Section 233B(11) of the Companies Act, 1956, and Section 148(8)(a) of the Companies Act, 2013. The NCLT considered the delays and imposed fines on the company and its directors based on the violations.

2. Discrepancy in fines:
The appellants argued that the fines imposed on the company and its directors were disproportionate. While the company was fined an amount significantly less than the maximum prescribed, the directors were fined the maximum amount. The appellants sought leniency and parity in the fines imposed, highlighting Section 147(1) of the Companies Act, 2013, which outlines the fines for contraventions.

3. Equality in treatment:
Considering the arguments presented, the Tribunal found merit in the appellants' contention regarding unequal treatment of the company and its directors in the imposition of fines. In light of this, the Tribunal modified the order to ensure parity. The fine under Section 148(8) for the financial years in question was reduced from Rs. 2,00,000 to Rs. 40,000 for the directors, aligning it more closely with the fine imposed on the company.

Conclusion:
The appeal was allowed, and the Tribunal modified the order to address the discrepancy in fines imposed on the company and its directors. The decision aimed to ensure equality in treatment and align the fines more proportionately based on the violations of the Companies Act provisions.