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2018 (11) TMI 195 - AT - Companies LawRepetitive default - scope of section 451 of the companies act - Compounding of certain offence u/s 441 - Application for compounding the same offence committed by defaulting Company along with its Officers in default - Offence punishable with fine or imprisonment or only with fine or fine and imprisonment on repeated defaults committed within three years - Held that - Company cannot be imprisoned. The officer of the company who is in default shall be punishable with imprisonment or fine or with both as prescribed under Section 86. Whether such officer is to be imposed punishment of fine or imprisonment or both will dependent on the basis of gravity of offence which can be decided only by the Court of Competent Jurisdiction (Special Court). Such power having been delegated to the Court of Competent Jurisdiction, it cannot be held that in view of Section 451 for committing the same offence for the second or subsequent occasions within a period of three years, the officer is liable to be imprisoned. If such interpretation is given, then it will amount to taking away the power of the Competent Court (Special Court) to decide whether in the fact and circumstances of the case and on the basis of gravity of offence, the officer will be liable for punished of imprisonment or fine or both. Therefore, we hold that the Tribunal is wrong in holding that if Section 451 is read along with Section 441(6) for offence punishable with fine or imprisonment or only with fine or fine and imprisonment on repeated defaults committed within three years, the Tribunal does not have jurisdiction to compound the offence. A bare perusal of the provision makes it evident that Section 451 only provides that fine in case of any repeated defaults shall be twice the amount of fine in addition or in alternative to any imprisonment for such default if prescribed under the relevant provisions of Act, 2013. It does not make the imprisonment mandatory. Secondly, use of word any in Section 451 in the phrase in addition to any imprisonment for that offence leaves discretion with the prosecuting authority/court to punish the defaulter with imprisonment. Had the intention of the legislature been to make the imprisonment mandatory, it would not have used the word any . If the interpretation adopted by the Tribunal is accepted then it will amount to substituting words in a penal provision, which is impermissible in the law. Tribunal failed to appreciate Section 451 of the Companies Act, 2013. We further hold that Section 451 only provides with fine in case of any repeated defaults shall be twice the amount of fine , in addition to any imprisonment for such default under the relevant provisions of the Act, if prescribed and it does not make the imprisonment mandatory . In view of the aforesaid findings, we set aside the impugned order dated 16th February, 2018 and remit the respective Company Petitions to the Tribunal for decision on its merit taking into consideration the offence committed by the Company and its Officers and the Report of the Registrar of Companies. We make it clear that we have not decided individual claim of one or other Applicants/Petitioner which is to be determined by the Tribunal. The appeals are allowed with aforesaid observations and directions. However, in the facts and circumstances of the case, there shall be no order as to cost.
Issues Involved:
1. Joint application for compounding offences by a defaulting company and its officers. 2. Joint application for compounding the same offence committed in different years. 3. Compounding of offences punishable with imprisonment or fine if repeated within three years. 4. Compounding of offences punishable with only fine if repeated within three years. 5. Tribunal's jurisdiction to compound offences where the fine does not exceed ?5,00,000. Issue-wise Detailed Analysis: 1. Joint Application for Compounding Offences by a Defaulting Company and Its Officers: The Tribunal held that there is no bar on preferring a single application for compounding the same offence committed during different financial years by the Company and its Officers. The Tribunal emphasized that procedures are deemed to be permitted unless expressly prohibited, referencing the Supreme Court's decision in "Rajendra Prasad Gupta v. Prakash Chandra Mishra AIR 2011 SC 1137." Section 424 of the Companies Act, 2013, allows the Tribunal and the Appellate Tribunal to regulate their own procedures, guided by principles of natural justice. Thus, joint applications for compounding are permissible, as there is no express prohibition against such joinder of parties or causes of action. 2. Joint Application for Compounding the Same Offence Committed in Different Years: The Tribunal found no statutory bar against filing a joint application for compounding offences committed in different years. It was noted that the Central Government's circulars from 1993 and 2018 reiterated that there is no bar under the Companies Act, 2013, on filing joint compounding applications. This interpretation aligns with the principle that procedures are allowed unless explicitly forbidden. 3. Compounding of Offences Punishable with Imprisonment or Fine if Repeated Within Three Years: Section 451 of the Companies Act, 2013, deals with punishment for repeated defaults. The Tribunal clarified that the provision does not make imprisonment mandatory for repeated offences within three years. Instead, it prescribes that the fine for such offences shall be twice the amount of the original fine, in addition to any imprisonment if prescribed under the relevant provision. The Tribunal emphasized that the word "any" in Section 451 indicates discretion in imposing imprisonment, and the penal provisions must be construed literally, as held by the Supreme Court in "Abhiram Singh v. CD Commachen (2017) 2 SCC 629." 4. Compounding of Offences Punishable with Only Fine if Repeated Within Three Years: The Tribunal held that for offences punishable with only fine, Section 451 still applies, but it does not mandate imprisonment. The Tribunal's interpretation ensures that the power to decide the nature of punishment (fine or imprisonment) remains with the competent court, and Section 451 only enhances the fine for repeated offences within three years. 5. Tribunal's Jurisdiction to Compound Offences Where the Fine Does Not Exceed ?5,00,000: The Tribunal clarified that Section 441 of the Companies Act, 2013, does not impose a pecuniary jurisdiction limit on the Tribunal itself. Both the Tribunal and the Regional Director or any officer authorized by the Central Government can compound offences where the maximum fine does not exceed ?5,00,000. The Tribunal's erroneous reading of Section 441 to limit its jurisdiction was corrected, affirming that the Tribunal has the authority to compound all offences irrespective of the fine amount. Separate Judgment by Technical Member: The Technical Member concurred with the observations on various issues but differed on the interpretation of Section 451. The Technical Member emphasized that Section 451, a new provision under the Companies Act, 2013, mandates enhanced punishment for repeated offences within three years. The phrase "in addition to any imprisonment" in Section 451 implies that repeated offences punishable with fine or imprisonment as a first offence would become punishable with both fine and imprisonment upon repetition within three years. Consequently, such repeated offences would not be compoundable under Section 441(6)(b). Conclusion: The Tribunal set aside the impugned order dated 16th February 2018, and remitted the respective Company Petitions to the Tribunal for a decision on their merits, considering the offences committed by the Company and its Officers and the Report of the Registrar of Companies. The appeals were allowed with the observations and directions provided, without any order as to costs.
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