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TMI Blog2003 (11) TMI 334X X X X Extracts X X X X X X X X Extracts X X X X ..... erved that during the financial years 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of section 211 of the Companies Act, 1956. The nature of the land that is leasehold, freehold etc. has also not been mentioned in the Annual Accounts of 1994-95." 3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under section 211 of the Act. The company submitted its reply on 28-3-2000 giving an explanation to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain offences . (1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), any offence punishable under this Act (whether committed by a company or any officer thereof), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by ( a )the Company Law Board; or ( b )where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify : Provided that the sum so specified shall not, in any case, exceed the maximum amount of the fine which may be imposed for the offence so compounded : Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account. (2) Nothing in sub-section (1) shall apply to an of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fee, and the additional fee, required to be paid under section 611, such return, account or other document within such time as may be specified in the order. (6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both. (7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974),- ( a )any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in that Act for compounding of offences; ( b )any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable. (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section." ****** "Section 10F. Appeals against the orders of the Company Law Board. Any person aggrieved by any decision or ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, therefore, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of section 621A of the Act. Sub-section (7) of section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... criminal court to deal with matters relating to compounding of offences. 12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or the imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of section 621A(1)( b ) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5,000. The procedure for compounding such offences by the Regional Director or the Company Law Board provided for under sub-section (3) to sub-section (6). Sub-section (4)( a ) provides that every application for the compounding of an offence shall be made to the Registrar who shall forward the same, together with his comments thereon, to the Company Law Board or the Regional Director, as the case may be. Sub-section (4)( b ) of the aforesaid section provides that where an offence is compo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a Criminal Court." (p. 49) 14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoffland Finance Ltd. s case ( supra ). I have carefully perused the decision of Hoffland Finance Ltd. s case ( supra ) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. 15. Having considered the submissions as also the provisions of section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. Therefore, the Company Law Board can exercise its right to compound the offence of the nature provided for in the section before institution of any prosecution as also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the Criminal Court by the Registrar upon which the accused would stand discharged from the offence. 16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word prior should be read into the expression with the permission of the court meaning thereby with the prior permission of the court as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment of the offences punishable with fine and imprisonment. The use of the expression both appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word prior cannot also be read in the expression permission of the Court , as suggested. 18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses ( a ) and ( b ) of sub-section (7). Under the aforesaid sub-section of the offence punishable with imprisonment or with fine or both shall be compoundable with the permission o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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