2020 (8) TMI 581 - AT - Companies Law

Compounding of offence - Section 441(1) of Companies Act - Whether Tribunal can impose the compounding fees under Section 441 (1) of the Act, less than minimum prescribed for the offence under Section 165 (1) read with Section 165(6) ? Time limitation for filing appeal - HELD THAT - In this case, the Respondent was conscious that after coming into force the provisions under Section 165(1) of the Act, he cannot hold Directorship in more than 20 companies and Directorship in more than 10 Public Companies, at the same time. As per the Section 165 (3) of the Act, till 31.03.2015 Respondent was required to resign from the Directorship of the Companies more than the limits specified in sub- Section 1 of Section 165 of the Act, within the specified period. The Respondent has resigned from the Directorship of M/s Fabius Properties Pvt. Ltd. and resignation was accepted by the Company on 29.12.2015 and there is nothing on record to presume that the Respondent violated the provisions on a bonafide belief. The conduct of Respondent shows that he acted in conscious disregard of its obligation. The Tribunal failed to notice the minimum fine prescribed under Sub-Section 6 of Section 165 of the Act, which was applicable at relevant time i.e. before the amendment - In view of the error apparent in the impugned order dated 03.04.2018 passed by the Tribunal, thus, the order cannot be upheld. The Respondent has contravened the provisions of 165(1) of the Act, which is punishable under Sub-Section 6 of Section 165 of the Act. Taking into consideration, the facts and circumstances of the case, we imposed minimum fine at the rate of five thousand rupees for every day for the period 01.04.2015 to 21.02.2016 i.e. 272 days. We quantified penalty to ₹ 13,60,000/-. The Respondent has already paid ₹ 50,000/- after adjustment, now he is liable to pay ₹ 13,10,000/-. Therefore, The Respondent is directed to pay such amount within a period of 60 days in National Company Law Tribunal, Kolkata. Appeal allowed.

Summary

Issues:
1. Appeal against order allowing compounding application under Section 441 of the Companies Act, 2013.
2. Calculation of compounding fees for contravention of Section 165(1) read with Section 165(3) of the Act.
3. Interpretation of the Tribunal's power under Section 441(1) to impose compounding fees.

Detailed Analysis:

1. The Appellant Registrar filed an Appeal against the order passed by the National Company Law Tribunal allowing the compounding application under Section 441 of the Companies Act, 2013. The Respondent, a Director of multiple companies, tendered resignation after being served a show cause notice for contravention of Section 165(1) read with Section 165(3) of the Act. The Tribunal imposed a compounding fee of ?50,000, leading to the appeal.

2. The crux of the case revolved around the calculation of compounding fees for the contravention of Section 165(1) read with Section 165(3) of the Act. The Appellant argued that the Respondent should pay the minimum fine prescribed for the violation, amounting to ?13,60,000, as per Section 165(6) of the Act. In contrast, the Respondent contended that the resignation was timely and in compliance with the Act, thus challenging the necessity of the imposed compounding fee.

3. The Tribunal's power under Section 441(1) to determine compounding fees was a pivotal issue. The Appellant insisted that the compounding fee should align with the minimum amount prescribed for the offence, citing precedents. Conversely, the Respondent argued that the Tribunal's discretion in imposing compounding fees should not be restricted to the minimum penalty, especially in cases of technical breaches or mitigating circumstances, referencing relevant legal judgments.

In the judgment, the Appellate Tribunal deliberated on the gravity of the offence, intentional nature of the act, and the maximum punishment prescribed. The Tribunal emphasized that the Respondent's conscious disregard of obligations warranted the imposition of the minimum fine. Citing legal precedents, the Tribunal concluded that the minimum penalty prescribed by law should be upheld, setting aside the previous order and directing the Respondent to pay the quantified penalty of ?13,10,000 within 60 days. The judgment highlighted the importance of adhering to statutory minimum fines and ensuring compliance with legal provisions.