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TMI Blog2017 (2) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... ereas the Company Law Board/Tribunal has power and competency, under the Companies Act, to entertain even suo moto application before institution of criminal. It is not in dispute that offence in question is compoundable and, the applicants have also declared unequivocally that the new management of the Company has taken appropriate actions and implemented policies/designs to prevent any future defaults. It is not in dispute that the present offence is the first of its kind committed by the Company and, the Registrar of Companies also has not opposed the case and left it to the consideration of Tribunal as per merits. The Company also committed not to recur this type of the offences in future. In the light of the facts and circumstances of the case and, also in the interest of Justice, we are inclined to allow the present application by exercising the powers conferred under Section 621A of the Companies Act, 1956, however, subject to payment of compounding fees for the alleged offence committed U/s. 217(2AA) of the Companies Act, 1956. Thus direct each applicants to pay ₹ 20,000/- (Rupees Twenty Thousand Only) which is the maximum penalty as prescribed under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (which is hereinafter referred to as Act) committed by the Company under sections 383A, 372A, 205, 205A , 217(3), 211(3A)(3C) r/w AS9, AS26, AS13, AS20, 217(2AA), 211 r/w Schedule VI, Part I, 193(1), 211 r/w Schedule VI, Part I II, 147, 224(1A) of the Act. 4. In pursuant to the above inspection, the Company has filed the present application suo-motu by praying the Tribunal to allow them to compound the offence alleged to have been committed u/s. 217(2AA) of the Act, on reasonable terms and conditions, as it may deem fit and just. The allegation made by the office of Regional Director in the said notice is that the Board of Directors in the reports dated 31.07.2007, 22.09.2008 and 28.08.2009, for the financial years ended dated 31.03.2005, 31.03.2006, 31.03.2007, 31.03.2008 and 31.03.2009, has stated under Directors Responsibility Statement that the appropriate accounting standards have been followed in the preparation of annual accounts . However, on examination, it is found that the Company did not comply with the Accounting Standard 9 relating to Revenue Recognition ; the Accounting Standard 26 relating to Intangible Assets ; the Accounting Standard 13 relating to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Exchange (India) Private Limited on 21st January, 2003, (b) Cambridge Technology, Enterprises Private Limited on 12th March, 2004 (c) Cell Exchange (India) Private Limited on 22nd July, 2004 (d) Cambridge Technology Enterprises Private Limited on 16th March, 2005 (e) And on 31st March 2006, the Company was converted into a public limited Company vide resolution dated 14th March, 2006. Accordingly, the Company was changed to Cambridge Technology Enterprises Limited vide CIN No. L72200AP1999PLCO30997. 8. It is further stated in the report that it is first offence of the Company coming for Compounding. As per section 217(6) of the Companies Act, 1956, if any such person , being a Director of a Company , fails to take all reasonable steps to comply with the provisions of sub-sections (1) to (3), or being the Chairman , signs the Boards report otherwise than in conformity with the provisions of sub-section(4), he shall, in respect of each offence, be punishable with imprisonment for a term, which may extend to six months, or with fine, which may extend to 20,000/- or with both. Ultimately, the Registrar of Companies did not oppose the application for compounding of the offence in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in a case, where the Companies Act, prescribes a penalty of fine or imprisonment or imprisonment with fine and, also whether court permission is required, when a prosecution has already been instituted by the Registrar of Companies. There are two conflicting decisions on the question whether permission of the Court is necessary or not, before considering issue of compounding of offence committed under the Companies Act, 1956. In Reliance Industries Ltd case (1997) 89 Company cases 67 CLB), after discussing the issue in detail, has held that Company Law Board is vested with power, authority and jurisdiction to compound offences and, it is only when such compounding is done that the matter can be brought before the court for according permission to compound the offences, which are punishable with fine or imprisonment or both. However, in Hoffland Finance Ltd case, where default under section 68(a)(b) of the Companies Act, 1956 was under consideration, the Learned Member of CLB found that in earlier case, the Northern Region Bench of the Company Law Board, while considering similar default has directed the defaulter to obtain permission of the criminal court and, after obtaining su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Majumdar, S. Balasubramanian and C. Das, has referred 5 types of penalties, which have been provided in the Companies Act, for the violation/contravention of the provisions. They are (1) fine only, (2) imprisonment or fine, (3) imprisonment or fine or with both, (4) imprisonment and fine (5) imprisonment only. Before section 621A was inserted by the Companies Amendment Act, 1988 (this section came into effect on May 31st, 1991), as per section 621 all offences against the Act were required to be tried by the Court, on the complaint of the Registrar or shareholder of the company or person authorised by the Central Government in that behalf. Section 621A was inserted on the recommendations of the Sachar Committee. After discussing the entire Law on the subject, Hon ble Full Bench held that the sub-section 1 of section 621A confers power on the Regional Director to compound offences punishable with fine only subject to certain limitations. The Hon ble Full Bench, vide its order dated 12th May, 1997, has inter alia held as follows: The exercise of powers of the Company Law Board under sub-section (1), is not subject to the provisions of sub-section (7) and the decision of the Compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court of India by Civil Appeal No. 2102 of 2004 which was dismissed vide order dated 10th May 2013 by holding that the power under sub-section (1) and Sub-Section (7) of Section 621A are parallel powers to be exercised by the Company Law Board or authorities mentioned therein and prior permission of the court is not necessary for compounding of the offence. 17. In fact, there is hardly any ambiguity for the powers to be exercised by CLB under Section 621A of the Companies Act, 1956. Only bar for compounding of offence by CLB is in a case where an offence punishable with imprisonment only, or with imprisonment and also fine, and it can be done either before or after the institution of any prosecution. Section 621A of the Act, read as follows: (1) Notwithstanding anything contained in the Code of Criminal procedure, 1973, 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 fine, may, either before or after the institution of any prosecution, be compounded by- (a) The Company Law Board etc 18. In the light of the above discussions of the prov ..... X X X X Extracts X X X X X X X X Extracts X X X X
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