2020 (10) TMI 703 - Tri - Companies Law

Contravention of Section 96 R/w Section 99 Section 441 of Companies Act, 2013 - compounding of offences relating to contravention - HELD THAT - The ROC has not opposed the instant Petition but stated material facts regarding violations and maximum prescribed and number of days in complying with violations. The Petitioners have satisfactorily explained the reasons for delay in complying with violations in questions and filed the instant Petition suo motto, that too after making good violations in question. The Petitioners have not committed similar violations earlier and these are the first violations committed by them. The Report of ROC mentioned maximum penalties prescribed under the extant sections. Therefore, depending on the facts and circumstances of the case, the Tribunal is empowered either to impose suitably penalty or even wait it. Under sub section 1 of Section 441 of Companies, Act, 2013, the Tribunal is empowered to compound violations/offences committed by Companies, either before or after prosecution, on specifying quantum of payment, however, such sum should not in any case exceed the maximum amount of fine which may be imposed for the offence so compounded. The quantum of penalty specified by the ROC in his report furnished maximum penalty prescribed under the relevant section. There is no minimum penalty prescribed under the section and it only says upto one lakhs and upto ₹ 5000 per day. Therefore, the Tribunal has to take into consideration of the extenuating circumstances as available in given case. As stated supra, the Learned Counsel, has satisfactorily explained to Tribunal, the reasons for committing violations/offences in question, so as consider to impose minimum penalty. He is also justified to take a plea of present adverse economic situation arise due to pandemic. Therefore, we are inclined to take a lenient view of matter and thus want to impose minimum Compounding fine. Application allowed in part.

Issues Involved:

1. Delay in holding Annual General Meetings (AGM) for financial years 2016-17 and 2017-18.
2. Compounding of offences under Sections 96, 99, and 441 of the Companies Act, 2013.
3. Determination of penalties for the company and its directors for the contraventions.

Issue-wise Detailed Analysis:

1. Delay in holding Annual General Meetings (AGM) for financial years 2016-17 and 2017-18:

The company, incorporated on 6th February 2006, failed to hold its AGM for the financial year 2016-17 by the due date of 30th September 2017, conducting it instead on 18th January 2019, resulting in a delay of 474 days. Similarly, the AGM for the financial year 2017-18, due by 30th September 2018, was held on 15th February 2019, resulting in a delay of 137 days. The delays were attributed to disruptions caused by a USFDA inspection and subsequent business suspension, which derailed routine compliance activities.

2. Compounding of offences under Sections 96, 99, and 441 of the Companies Act, 2013:

The petitioners sought to compound the offences related to the delayed AGMs under Sections 96, 99, and 441 of the Companies Act, 2013. Section 96(1) mandates the timely holding of AGMs, and Section 99 prescribes penalties for non-compliance. The Registrar of Companies (ROC) confirmed the delays and calculated the maximum fines as follows:

- For the company: ?32,55,000 for each year of delay.
- For each director: ?32,55,000 for each year of delay.

However, the petitioners argued that the violations were neither deliberate nor intentional, and the company had faced significant operational challenges due to the USFDA inspection and subsequent business disruptions.

3. Determination of penalties for the company and its directors for the contraventions:

The Tribunal considered the explanations provided by the petitioners, the unprecedented circumstances, and the fact that the petitioners had not committed similar violations previously. The Tribunal noted that under Section 441, it had the discretion to impose penalties up to the maximum amount specified but could also consider extenuating circumstances to impose lesser penalties.

Given the adverse economic conditions and the petitioners' proactive steps to rectify the violations, the Tribunal decided to impose minimum compounding fines as follows:

- For the company (Petitioner No. 1):
- For 2016-17: ?24,740 (?20,000 + ?10 per day for 474 days).
- For 2017-18: ?21,370 (?20,000 + ?10 per day for 137 days).

- For Mr. Ravi Achar (Petitioner No. 2):
- For 2016-17: ?24,740 (?20,000 + ?10 per day for 474 days).
- For 2017-18: ?21,370 (?20,000 + ?10 per day for 137 days).

- For Mr. Ronald Howard Semler (Petitioner No. 3):
- For 2016-17: ?24,740 (?20,000 + ?10 per day for 474 days).
- For 2017-18: ?21,370 (?20,000 + ?10 per day for 137 days).

- For Mr. Sajan Podanolanda Chinnappa (Petitioner No. 4):
- For 2016-17: ?20,370 (?20,000 + ?10 per day for 37 days).
- For 2017-18: ?20,650 (?20,000 + ?10 per day for 65 days).

The Tribunal exempted Mr. Guru Veerappa Betageri and Mr. Karnanda Nanaiah Bopanna from fines due to their resignations and non-involvement in daily operations during the relevant periods.

Conclusion:

The Tribunal disposed of C.P. No. 73/BB/2020 by compounding the offences with the specified fines and directed the petitioners to pay the penalties within six weeks. Upon submission of proof of payment, the ROC was instructed to take appropriate action.

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