2017 (5) TMI 994 - HC - Companies Law

Compounding of offence - composition fee declined - Held that - Considering the default in filing the annual returns and the balance sheets which amount to the offences punishable under Section 162/220 (3) of the Companies Act, applying the doctrine of proportionality, negligible imposition of composition fee would also not serve the purpose. It cannot be held that the composition fee of ₹ 8,00,000/- on each of the petitioners imposed by the learned Additional Sessions Judge was not a fair and just exercise of the discretion. This Court in a petition under Section 482 Cr.P.C. or Article 226 of the Constitution of India would interfere in the order of the Court below only if the same results in failure of justice or the discretion is exercised contrary to the settled principles of law. Considering the fact that the composition fee has been brought down considerably by the learned Additional Sessions Judge, this Court finds no merit in the petition.

Summary

Issues involved:
1. Challenge to the order reducing compounding fees.
2. Delay in filing annual returns and balance sheets under the Companies Act.
3. Application of the principle of proportionality in sentencing.
4. Interpretation of the doctrine of proportionality in administrative law.

Detailed Analysis:

1. The petitioners challenged the order reducing compounding fees imposed for contravention of Section 159 of the Companies Act, 1956. The compounding fee was reduced from ?15,00,000 to ?8,00,000 each by the learned Additional Sessions Judge. The petitioners contended that the reduced amount was still on the higher side, leading to the challenge before the High Court.

2. The complaint filed by the Registrar of Companies alleged delays in filing annual returns and balance sheets for multiple years. The delay in filing these documents led to the imposition of compounding fees. The maximum fine imposable on the company was calculated at ?61,48,000 based on the delay, which was reduced to ?15,00,000 by the Trial Court and further reduced by the Additional Sessions Judge to ?8,00,000.

3. The High Court emphasized the application of the principle of proportionality in sentencing for the offence. Citing previous judgments, the Court highlighted the need for a fair and just exercise of discretion in determining the appropriate penalty. The Court noted that the composition fee reduction by the Additional Sessions Judge was a result of the principle of proportionality, ensuring that the penalty was not disproportionately excessive.

4. The judgment delved into the interpretation of the doctrine of proportionality in administrative law. Referring to previous Supreme Court decisions, the Court discussed the importance of balancing the factors and considerations in decision-making. The Court emphasized that the doctrine of proportionality aims to prevent excessive penalties or infringements of rights, ensuring a reasonable relationship between objectives and means used.

In conclusion, the High Court dismissed the petitions challenging the order reducing compounding fees, stating that the composition fee imposed by the learned Additional Sessions Judge was a fair and just exercise of discretion. The judgment underscored the significance of applying the principle of proportionality in sentencing and administrative decision-making to ensure fairness and reasonableness in legal proceedings.