2020 (8) TMI 610 - AT - Companies Law

Compounding application - resignation from the Directorship of four Companies - Directorship in more than 20 companies (10 in public companies) as on 31.3.2015 - section 165 of the Companies Act 2013 - contravention of provisions for a period of 01.04.2015 to 21.02.2016 i.e. 326 days - HELD THAT - Admittedly, in this case, the Respondent has violated the provisions under Section 165(1) read with Section 165(3) of the Act, for a period 01.04.2015 to 21.06.2016 which is punishable under Section 165(6) of the Act. 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 vacated the Directorship of three Companies. However, after receipt of the notice from the Appellant the Respondent has resigned from the Directorship of four Companies on 22.02.2016 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. 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)? - HELD THAT - From the impugned order its manifest and clear that 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 11.07.2018 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 - the minimum fine at the rate of five thousand rupees for every day for the period 01.04.2015 to 21.02.2016 i.e. 326 days imposed - penalty quantified to ₹ 16,30,000/-. Appeal allowed.

Summary

Issues:
- Appeal against the order passed by National Company Law Tribunal, Kolkata Bench, allowing compounding application subject to payment of compounding fees.
- Condonation of delay in filing the appeal.
- Jurisdiction of the Tribunal to reduce the compounding fees below the minimum prescribed for the offence under Section 165(6) of the Companies Act 2013.

Analysis:

1. The appeal was filed against the order of the National Company Law Tribunal, Kolkata, allowing the compounding application subject to the payment of compounding fees. The Respondent had contravened the provisions of Section 165(1) of the Act by holding Directorship of companies beyond the permissible limit. The Appellant challenged the order, arguing that the Tribunal should have imposed the minimum compounding fees as prescribed by law. The Respondent contended that the Tribunal, considering the circumstances, had the discretion to impose a lower fine.

2. The Appellate Tribunal, after considering the arguments, referred to previous judgments and legal provisions. It noted that the Respondent had violated the provisions under Section 165(1) of the Act, and his actions showed a conscious disregard of obligations. The Tribunal highlighted that the penalty should not be imposed unless the party acted deliberately against the law or was contumacious. The Respondent's resignation from directorship after receiving notice indicated a lack of bona fide belief.

3. The Tribunal also discussed the power and discretion of the adjudicating authority in deciding on the quantum of penalty. It emphasized that the minimum penalty prescribed by law should be imposed, and the Tribunal cannot reduce the fine below the statutory minimum. The Tribunal found that the impugned order failed to consider the minimum fine prescribed under the relevant section of the Act.

4. Consequently, the Appellate Tribunal set aside the order of the National Company Law Tribunal, Kolkata, and imposed a penalty of &8377; 16,30,000 on the Respondent for the contravention. The Respondent was directed to pay the remaining amount of &8377; 16,05,000 within 60 days. The Registry was instructed to send a copy of the judgment to the concerned authorities for compliance.

In conclusion, the appeal was allowed, and the Tribunal's decision was overturned due to the failure to impose the minimum prescribed penalty. The judgment emphasized the importance of adhering to statutory provisions and ensuring appropriate penalties for violations under the Companies Act 2013.