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TMI Blog2018 (3) TMI 1292X X X X Extracts X X X X X X X X Extracts X X X X ..... 16/123/ND/2017, Company Application No. CP-16/127/ND/2017, Company Application No. CP-16/142/ND/2017, Company Application No. CP-16/141/ND/2017, Company Application No. CP-16/133/ND/2017, Company Application No. CP-16/132/ND/2017, Company Application No. CP-16/134/ND/2017 And Company Application No. CP-16/144/ND/2017 COMMON ORDER All the above listed 23 applications have been filed under section 441 of the Companies Act, 2013 for the purpose of compounding of offences arising under either the provisions of 2013 Act or 1956 Act and the same has been forwarded to this Tribunal along with the report of Registrar of Companies, NCT of Delhi & Haryana and involves one or more of the following common questions of law and hence this common order: -- i. While ascertaining the maximum amount of fine as specified under section 441(l)(b) of the Companies Act, 2013 and to see whether it exceeds the threshold limit of five lakh rupees or not, in order to determine for the limited purpose as to which of the compounding authority i.e. the Tribunal or the Regional Director to whom the Registrar is required to forward the application for compounding, and the basis for such computation to be adop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of the 2013 Act or as the case may be by the 1956 Act and the alleged non-compliance of which in the first place has given rise to the filing of these compounding applications and the necessity for computation of the maximum amount of fine and so quantified by the Registrar of Companies is given at the end of the order by way of annexures in co-relation with the respective application numbers reflected as above. Brief facts in relation to each of the applications are given below in the same seriatim as listed above. 1) Company Application No. CP-16/176/ND/2017 The applicant company along with three of its erstwhile directors have filed the above application for compounding for default in compliance with the provisions of section 92 in filing Annual Returns for the years 2013-2014 and 2014-15. The penalty in relation to the defaulting company as prescribed under section 92 is to the minimum extent of Rs. 50,000/- and the maximum fine that can be imposed is Rs. 5,00,000/-. In relation to each of the officers in default, the quantum of fine prescribed under section 92 is that prescribed for the defaulting company. In view of a joint application having been filed both in terms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... joint application having been filed, both in terms of offence committed for two different years as well as jointly by all the four applicants, the Registrar of Companies, NCT of Delhi & Haryana as against each of the defaulters, has sought to aggregate the maximum fine prescribed for the two years in default under the section as well as for each of the defaulters for the defaulting periods and has quantified as given in Annexure-2 of this order. 4) Company Application No. CP-16/177/ND/2017 The applicant company along with three of its erstwhile directors have filed the above application for compounding for default in compliance with the provisions of section 149 in having in its Board, at least one director who has stayed in India for not less than 182 days filing for the year 2015-16. The penalty in relation to the defaulting company as prescribed under section 172, as section 149 does not contain a penal provision and taking recourse to the said section in order ascertain the penalty for violation of section 149 of the Act it is seen that the company and every officer of the company who is in default shall be punishable with fine which is to the minimum extent of Rs. 50,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 162 of 1956 Act if a company fails to comply with any of the provisions contained in section 159, 160 or 161 of the said Act, the company and every officer of the company who is in default shall be punishable with fine which may extend to 500/- rupees for every day during which the default continues. In relation to contravention of section 92 of the Companies Act, 2013 the penalty in relation to the defaulting company as prescribed under section 92 is to the minimum extent of Rs. 50,000/- and the maximum fine that can be imposed is Rs. 5,00,000/-. In relation to each of the officers in default, the quantum of fine prescribed under section 92 is that prescribed for the defaulting company. In view of a joint application having been filed, both in terms of offence committed for four different years as well as jointly by all the four applicants, the Registrar of Companies, NCT of Delhi & Haryana as against each of the defaulters, has sought to aggregate the maximum fine prescribed for the four years in default under the relevant Sections as well as for each of the defaulters for the defaulting periods and has quantified as given in Annexure-4 of this order. 7) Company Petition No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bed under section 210 (5) provides that if any person, being a director of a company, fails to take all reasonable steps to comply with the provisions of this section, 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 Rs. l0,000/- or with both, in relation to contravention of section 129(7) of the Act, the Managing Director, whole time Director in charge of Finance and Chief Financial Officer of the company or any other person charged by the Board with the duty of complying with the requirements of this section and in the absence of any of the officers mentioned above, all the directors shall be punishable with imprisonment for a term which may extend to one year or with fine which shall not be less than fifty thousand rupees which may extend to five lakh rupees or with both. In view of a joint application having been filed, both in terms of offence committed for four different years as well as jointly by all the four applicants, the Registrar of Companies, NCT of Delhi & Haryana as against each of the defaulters, has sought to aggregate the maximum fine prescribed for the four years in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of offence committed for four different years as well as jointly by all the four applicants, the Registrar of Companies, NCT of Delhi & Haryana as against each of the defaulters, has sought to aggregate the maximum fine prescribed for the four years in default under the section as well as for each of the defaulters for the defaulting periods and has quantified as given in Annexure-7 of this order. 10) Company Application No. CP-16/121/NP/2017 The applicant company along with two of its directors have filed the above application for compounding for default in compliance with the provisions of section 217(4) of the Companies Act, 1956 wherein the Board of Directors report was required to contain details as prescribed under section 217(1)(e) of the Companies Act, 1956. The years for which the default has arisen is stated to be 2010-11, 2011-12, and 2012-13. The penalty in relation to the default arising in relation to violation of section 217(1)(e) and section 217(4) has been prescribed under section 217(5) of the Companies Act, 1956 and the maximum penalty is to the extent of Rs. 20,000/- in relation to any person being a Director of the Company who has failed to take reasonable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... default, shall be punishable with fine which may extend to 500/- rupees per day during which the default continues. In relation to contravention of section 92 of the Companies Act,2013 the penalty in relation to the defaulting company as prescribed under section 92 is to the minimum extent of Rs. 50,000/- and the maximum fine that can be imposed is Rs. 5,00,000/-. In relation to each of the officers in default, the quantum of fine prescribed under section 92 is that prescribed for the defaulting company. In view of a joint application having been filed, both in terms of offence committed for four different years as well as jointly by all the nine applicants, the Registrar of Companies, NCT of Delhi & Haryana as against each of the defaulters, has sought to aggregate the maximum fine prescribed for the four years in default under the relevant Sections as well as for each of the defaulters for the defaulting periods and has quantified as given in Annexure-10 of this order. 13) Company Petition No. CP-16/126/ND/2017 The applicant company along with nine of its directors have filed suo-moto the above application for compounding the violation in compliance with the provisions of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the first during which such default continues. As per section 99 of the Companies Act, 2013, if any default is made in holding a meeting of the company in accordance with section 96 or section 97 or section 98 or in complying with any directions of the Tribunal, the company and every officer of the company who is in default shall be punishable with fine which may extend to one lakh rupees and in case of a continuing default, with a further fine which may extend to five thousand rupees for every day during which such default continues. In view of a joint application having been filed both in terms of offence committed for different years as well as jointly by all the nine applicants, the Registrar of Companies, NCT of Delhi & Haryana has sought to aggregate the maximum fine prescribed for all the four years and for each of the defaulters for the defaulting period and has quantified as given in Annexure-12 of this order. 15) Company Petition No. CP-16/125/ND/2017 The applicant company along with nine of its directors have filed the above application for compounding for default in compliance with the provisions of Sections 166 read with section 168 of the Companies Act, 1956 and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and loss account were so laid, or where the annual general meeting of a company for any year has not been held, there shall be filed with the Registrar within thirty days from the latest day or before which that meeting should have been held in accordance with the provisions of this Act. In relation to contravention of section 137(3) of the Companies Act, 2013 if a company fails to file the copy of financial statements under sub-section (1) or sub-section (2), as the case may be, before the expiry of the period specified in section 403, the company shall be punishable with fine of one thousand rupees for every day during which the failure continues but which shall not be more than ten lakh rupees, and the Managing Director and the Chief Financial Officer of Company, if any, and, in the absence of the Managing Director and the Chief Financial Officer, any other director who is charged by the Board with the responsibility of complying with the provisions of this section, and, in the absence of any such director, all the directors of the company, shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than one lakh rupees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rectors of the company, shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees, or with both. In view of a joint application having been filed, both in terms of offence committed for four different years as well as jointly by all the ten applicants, the Registrar of Companies, NCT of Delhi & Haryana as against each of the defaulters, has sought to aggregate the maximum fine prescribed for the four years in default under the section as well as for each of the defaulters for the defaulting periods and has quantified as given in Annexure-15 of this order. 18) Company Petition No. CP-16/142/ND/2017 The applicant company along with three of its directors have filed suo-moto the above application for compounding the violation in compliance with the provisions of section 159 of the Companies Act 1956 and under section 92 of the Companies Act, 2013 as the Company failed to file Annual Return within the period prescribed for the relevant years either under the Companies Act, 1956 or 2013 as the case may be for the financial years 2013-14 and 2014-15. As per section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , as the case may be, before the expiry of the period specified in section 403, the company shall be punishable with a fine of one thousand rupees for every day during which the failure continues but which shall not be more than ten lakh rupees, and the Managing Director and the Chief Financial Officer of Company, if any, and, in the absence of the Managing Director and the Chief Financial Officer, any other director who is charged by the Board with the responsibility of complying with the provisions of this section, and, in the absence of any such director, all the directors of the company, shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees, or with both. In view of a joint application having been filed, both in terms of offence committed for two different years as well as jointly by all the eight applicants, the Registrar of Companies, NCT of Delhi & Haryana as against each of the defaulters, has sought to aggregate the maximum fine prescribed for the two years in default under the section as well as for each of the defaulters for the defaulting periods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1956 provides that after the Balance Sheet and Profit & Loss account have been laid before a company at an annual general meeting as aforesaid, there shall be filed with the Registrar within thirty days from the date on which the Balance Sheet and Profit & Loss account were so laid, or where the annual general meeting of a company for any year has not been held, there shall be filed with the Registrar within thirty days from the latest day or before which that meeting should have been held in accordance with the provisions of this Act, In relation to contravention of section 137(3) of the Companies Act,2013 if a company fails to file the copy of financial statements under sub-section (1) or sub-section (2), as the case may be, before the expiry of the period specified in section 403, the company shall be punishable with fine of one thousand rupees for every day during which the failure continues but which shall not be more than ten lakh rupees, and the managing director and the Chief Financial Officer of Company, if any, and, in the absence of the managing director and the Chief Financial Officer, any other director who is charged by the Board with the responsibility of complying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... na has sought to aggregate the maximum fine prescribed for years 2014-15, 2015-16 and for each of the defaulters for the defaulting period. However, the ROC has not quantified in view of the fact that the applicant company as per the statement had convened the meeting for the relevant year and the same has been accepted by the ROC. 23) Company Petition No. CP-16/144/ND/2017 The applicant company along with five of its directors have filed the above application for compounding for default in compliance with the provisions of Sections 166 read with section 168 of the Companies Act, 1956 and section 96 of the Companies Act, 2013 for failing in holding its Annual General Meeting for the financial years 2014-15 and 2015-16. The penalty in relation to the defaulting company as per section 168 of the Companies Act, 1956 in holding a meeting of the company in accordance with section 166 or in complying with any directions of section 167, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty thousand rupees and in case of a continuing default, with a further fine which may extend to two thousand five hundred rupees for eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the compounding of an offence under this sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 403 shall be taken into account: Provided also that any offence covered under this sub-section by any company or its officer shall not be compounded if the investigation against such company has been initiated or is pending under this Act. (2) Nothing in sub-section (1) shall apply to an offence committed by a company or its officer within a period of three years from the date on which a similar offence committed by it or him was compounded under this section. Explanation.--For the purposes of this section,-- (a) any second or subsequent offence committed after the expiry of a period of three years from the date on which the offence was previously compounded, shall be deemed to be a first offence; (b) --Regional Director means a person appointed by the Central Government as a Regional Director for the purposes of this Act. (3) (a) 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 Tribunal or the Regional Director or any officer authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompounding 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. (7) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section. Perusal of sub section (7) of section 441 makes it amply clear that section 441 is a complete code by itself meant for the purpose of compounding of offences as sub section (7) of section 441 clearly lays down that an offence shall not to be compounded except in accordance with the provisions of the Section. However, though compounding relates to an offence, the term "offence" has not been defined either in the said provision or for that matter elsewhere in Companies Act, 2013. In the absence of definition of 'Offence' in Companies Act, 2013, recourse is had to General Clauses Act, 1897 which as per section 3(38) of the said Act defines the term 'Offence' to mean any act or omission made punishable by any law for the time being in force. The definition contained in Criminal Procedure Code of an 'Offence' also runs in a similar vein. Reverting to the provisions of Companies Act, 2013 and m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso state in the said report/comments to be annexed along with the application to be forwarded to the compounding authority about any pending prosecution in relation to which compounding is sought for in terms of sub-section (6) of section 441 as well as clauses (c) and (d) of sub section (3) of section 441. The nature of the offence committed as well as whether any prosecution is pending before the Court and whether the said offence in the first place can itself be compounded by the Tribunal or the Regional Director in the exercise of respective power vested of compounding with them under the provisions of section 441 of the Act are required to be brought to light in the report. Thus, in relation to an application for compounding, the role of the Registrar of Companies is crucial, both, in relation to making an assessment depending on the penalty, whether it be by way of fine or imprisonment and/or with both for deciding on its maintainability in the first place and secondly, also the compounding authority to whom the application is required to be forwarded for the purpose of compounding, keeping in view the penalty which visits in each case of violation of a particular provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Special Court and that the permission of the Special Court will be required only in relation to the said offences when prosecution is pending before the Court. In this connection it is also pertinent to note that by way of the Companies (Amendment) Act, 2017 the power of compounding has been extended in the statute itself in line with the decision of the above cited case of Cinepolis India (P.) Ltd. (supra) whereby under sub-section (1) of section 441 for the words 'with fine only' the words "not being an offence punishable with imprisonment only, or punishable with imprisonment and also with fine" has been substituted. Taking into consideration all of the above, it only reinforces the onus of the Registrar to bring forth in its report the details of prosecution, if any in relation to the offence initiated by it or other persons who are capable of initiating such prosecution of which it has notice and whether it is pending or otherwise disposed of or whether in relation to the offence per-se it has been compounded earlier and as to when it was compounded. Upon a further reading of section 441(1), in addition to the above fetters or absolute bar, as the case may be, the power of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the deposit or part thereof or any interest thereon within the time specified or such further time as may be allowed by the Tribunal. Rs. 1 Crore Rs. 10 Crore Officer who is in default shall be punishable with imprisonment which may extend to seven years or with fine which shall not be less than twenty-five lakh rupees but may extend to two crore rupees, or with both. 86 Punishment for contravention of provisions of Charges. 100000 1000000 In Case of Officer: Imprisonment: which may extend to 6 months or Fine: not less than 25 thousand rupees but which may extend to 1 lakh rupees or with both. 117(2) Failure in filing with the Registrar the copy of notice or agreement within stipulated time. 500000 2500000 Officer who is in default, including liquidator of the company, if any, shall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees. 134(8) Financial statement, Board's report, etc, 50000 2500000 Officer in default shall be punishable with imprisonment which may extend to three years or with fine which shall not be less than fifty thousand rupees but may extend to five lakh rupees, or with both. 185(2) C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ees, or with both. The above list clearly demonstrates that depending on the gravity of the offence that may be committed by a company and/or its officers, the Legislature, as a deterrent has sought to fix a higher quantum of fine or punishment wherein the maximum fine prescribed exceeds Rs. 5,00,000/- and has hence conferred jurisdiction upon the Tribunal to consider the application for compounding, as compared to offences for which a lower quantum is fixed, i.e., which does not exceed five lakh rupees and as are required to be dealt with by the Regional Director or such authority as may be prescribed by the Central Government. Further, in relation to the offences detailed in Table I above, it is also pertinent to note That they are specific in nature and the fine for the offence which is sought to be imposed on the Company are also fixed in nature, in addition to the respective defaulting officers/directors/independent professionals who are also sought to be penalized if the section warrants for the offence committed with imprisonment or fine or with both., subject of course to the minimum and maximum threshold limits of fine prescribed within which the authority compoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled illustration, being Table No II brings the issue into focus in which the provisions of the Act where the maximum amount of fine prescribed, for both the defaulting company and the defaulting individual with respect to the same offence and where individually it does not exceed five lakh rupees but however in the aggregate may or may not exceed the said limit is given hereunder: -- TABLE II-WHERE MAXIMUM FINE PRESCRIBED FOR THE OFFENCE COMMITTED UNDER THE RELEVANT SECTION DOES NOT EXCEED IN RELATION TO EITHER INDIVIDUALLY THE DEFAULTING COMPANY OR OTHER PERSONS IN DEFAULT IN EXCESS OF Rs. 5,00,000/- SECTION NATURE OF OFFENCE MINIMUM FINE MAXIMUM FINE REMARKS 26(9)- Contravention of provisions relating to issue of a prospectus 50000 300000 In case of others: Every person involved shall be punishable with imprisonment which may extend to three years or with fine which shall not be less than fifty thousand rupees but which may extend to three lakh rupees, or with both. 48(5) Contravention of provisions relating to variation of shareholder's rights. 25000 500000 In case of officers: Every officer who is in default shall be punishable with imprisonment for a term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the failure continues which may extend to 5 lakh Rupees. 92(5) If a company fails to file its annual return under sub-section (4) before the expiry of period specified under section 403 with additional [fee]. 50000 500000 In Case of Officer: Who is in default shall be punishable with imprisonment which may extend to six months or with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees, or with both. 102 Explanatory statement not attached to an item of special business in the notice calling general meeting -- 50000 (OR Five times the amount of benefit accruing to the promoter, director etc.) This section is applicable only to promoter, director, manager or other key managerial personnel who is in default. 105(3) If default is made in complying with sub-section (2) relating to proxies -- 5000 -- 105(5) If invitations to appoint as proxy a person or one of a number of persons specified in the invitations are issued --- 100000 -- 111(5) Non-compliance with the provisions regarding circulation of members resolution. -- 25000 In case of Officer: Every officer of the company who is in default shall be liable to a pen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt as per section 172. where a company contravenes any of the provisions of this Chapter and for which no specific punishment is provided therein. 162 Director appointed by enbloc resolution 50000 500000 Punishment as per section 172. where a company contravenes any of the provisions of this Chapter and for which no specific punishment is provided therein. 164 Appointment of director in contravention of provision of this section 50000 500000 Punishment as per section 172, where a company contravenes any of the provisions of this Chapter and for which no specific punishment is provided therein. 167(2) Verification of office of director 100000 500000 In case of Director: Person functions as a director even when he knows that the office of director held by him has become vacant on disqualifications he shall be punishable with fine and imprisonment may extend to 1 year or with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees, or with both. 172- Contravention of then provisions of Chapter XI relating to appointment and qualifications of directors. 50000 500000 Only officer of the company are liable under this provision. 173 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liable under this section:- The director, who issues a circular which has not been presented for registration and registered under clause (c) of sub-section (1), shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupees. 243(2) Consequence of termination or modification of certain agreements. -- 500000 The liability is only on: Any person or director of the company who is knowingly a party to contravention, shall be punishable with imprisonment which may extend to six months or with fine which may extend to five lakh rupees, or with both. 274(4) Directions for filing statement of affairs. 25000 500000 Only director or officer of the company in default: Shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupees, or with both. 284(2) Promoters, directors, etc., to cooperate with Company Liquidator. -- 50000 In case of other person: Where any person fails to discharge his obligations under sub-section (1), he shall be punishable with imprisonment which may extend to six m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brings to light the position that invariably, if the maximum amount of fine for the defaulting company and the defaulting person is aggregated, then it is seen that the maximum amount of fine exceeds five lakh rupees. Thus, the question as posed earlier resonates with still more vigour as to whether in order ascertain the threshold limit of five lakh rupees, the maximum fine amount prescribed as imposable on the defaulting company is alone required to be taken into consideration or that in addition to that those of defaulting individual(s) is also required to be taken or in the alternative to both to ascertain the threshold limit of five lakh rupees and to determine the compounding authority to whom the application is required to be forwarded by the Registrar depends purely based on the facts and circumstances of the each case, namely that of application for compounding and the number of persons seeking for compounding which will however lead to dichotomous situations without having any semblance of uniformity is also to be considered. In this connection, it is also required to be kept in view that there is a third category, where perforce the facts and circumstances alone decide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fusal or default continues. 137(3) Failure to file financial statements with the Registrar 1000 for each day 10,00000 In case of officers: Imprisonment: for a term which may extend to 6 months OR Fine: Not less than 1 lakh rupees but which may extend to 5 lakh rupees OR Both. 203(5) Contravention of the provisions of this section relating to appointment of Key Managerial personnel. 1,00000 5,00000 In case of every director and key managerial personnel who is in default, fine may extend to 50 thousand rupees and where the contravention is a continuing one further fine may extend to Rs. 1000 for every day after the first during which the contravention continues. * In the above table save section 137(3) where the maximum amount of fine fixed is Rs. 10,00,000/- all the other provisions contain a fine by way of maximum at or below Rs. 5,00,000/- TABLE III(b) - COMPOUNDING OF OFFENCE - CONTINUING DEFUALT WHERE MAXIMUM FINE IS NOT FIXED SECTION NATURE OF OFFENCE MINIMUM FINE MAXIMUM FINE REMARKS 14(2) Non-filing with the registrar altered copy of article of association which has the effect of converting public company into private company with the appro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l be punishable with fine which may extend to 10,000 rupees and where the contravention is continuing one, with a further fine which may extend to 1000 rupees for every day after the first during which the contravention continues. (This fine is as per sec 450) 55 Non-compliance with the provisions of the section relating to issue of redeemable preference share. -- 10,000 (further extendable to 1000 per day in case of continuing) The company and every officer in default or such other person shall be punishable with fine which may extend to 10,000 rupees and where the contravention is continuing one, with a further fine which may extend to 1000 rupees for every day after the first during which the contravention continues. (This fine is as per sec 450) 62(1) & (2) Issue of further shares in violation of the provisions of sub sec (1) -- 10,000 (further extendable to 1000 per day in case of continuing) The company and every officer in default or such other person shall be punishable with fine which may extend to 10,000 rupees and where the contravention is continuing one, with a further fine which may extend to 1000 rupees for every day after the first during which the contrav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilure is a continuing one, with a further fine which may extend to one thousand rupees for every day after the first during which the failure continues. 99 Default in holding a meeting of the company as u/s. 96, 197, 198 or in complying with any directions of the Tribunal. -- 100000 (further extendable to 5000 per day in case of continuing) The company and every officer in default shall be punishable with fine which may extend to one lakh rupees and in the case of a continuing default, with a further fine which may extend to 5 thousand rupees for every day during which such default continues 101 Failure to comply with requirements of notice of a general meeting. -- 10,000 (further extendable to 1000 per day in case of continuing) The company and every officer in default or such other person shall be punishable with fine which may extend to 10,000 rupees and where the contravention is continuing one, with a further fine which may extend to 1000 rupees for every day after the first during which the contravention continues. (This fine is as per sec 450) 106 Restricting a member from exercising voting rights on any ground except a ground set out in section 106(1) -- 10,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery day 25000 for every day This fine is not applicable to company. Person shall be liable for fine which shall not be less than five thousand rupees but may extend to twenty-five thousand rupees for every day after the first during which the contravention continues. 179 Exercise of certain power by the board of directors, otherwise at a Board meetings. -- 10,000 (further extendable to 1000 per day in case of continuing) The company and every officer in default or such other person shall be punishable with fine which may extend to 10,000 rupees and where the contravention is continuing one, with a further fine which may extend to 1000 rupees for every day after the first during which the contravention continues. (This fine is as per sec 450) 180 Exercise of Board's power without the consent of the company in general meeting. -- 10,000 (further extendable to 1000 per day in case of continuing) The company and every officer in default or such other person shall be punishable with fine which may extend to 10,000 rupees and where the contravention is continuing one, with a further fine which may extend to 1000 rupees for every day after the first during which the contravent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lakh rupees OR Both. 450 No specific penalty or punishment is provided in the Act. -- 10000 (further extendable to 1000 per day in case of continuing) The company and every officer in default or such other person shall be punishable with fine which may extend to 10,000 rupees and where the contravention is continuing one, with a further fine which may extend to 1000 rupees for every day alter the first during which the contravention continues. 453 Punishment for improper use of "Limited" or "Private Limited" 500 for every day 2000 for every day This fine is not applicable to company. Any person or persons shall be punishable with fine which shall not be less than Five hundred rupees but may extend to Two thousand rupees for every day. 469(3) Contravention of the Rules framed by Central Government. -- 5000 (further extendable to 500 per day in case of continuing) Any contravention shall be punishable with fine which may extend to five thousand rupees and where the contravention is a continuing one. with a further fine which may extend to five hundred rupees for every day after the first during which such contravention continues. Since even in relation to continuing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in or in excess of their pecuniary limits of five lakh rupees as compared to the specified limit under the 1956 Act initially being Rs. 5000/- and subsequently increased by way of Amendment Act of 2000 to Rs. 50,000/-, by erstwhile Company Law Board (CLB) or the Regional Director as the case may be. However, one major departure from the earlier regime of 1956 Act vis-a-vis the present one under the 2013 Act is that while in relation to quantum of punishment prescribed under the respective sections there was no clear demarcation between the defaulting company on the one hand and the individual be it a director, officer or other persons who were in default for the said offence on the other, under the 2013 Act each provision as can be seen from the Tables above clearly specifies separately the quantum of fine in relation to the defaulting company and separately for the defaulting persons being individuals who in addition to fine, or alternatively, may also be visited with imprisonment or both. The earlier regime of no clear demarcation led to lot of confusion in enforcing the penal provision where fine and imprisonment were both mandated and as to the mode of its enforcement in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntention of the legislature. It is an undisputed fact that for all the statutory offences, company also could be prosecuted as the "person" defined in these Acts includes "company, or corporation or other incorporated body." 31. As the company cannot be sentenced to imprisonment, the court cannot impose that punishment, but when imprisonment and fine is the prescribed punishment the court can impose the punishment of fine which could be enforced against the company. Such a discretion is to be read into the section so far as the juristic person is concerned. Of course, the court cannot exercise the same discretion as regards a natural person. Then the court would not be passing the sentence in accordance with law. As regards company, the court can always impose a sentence of fine and the sentence of imprisonment can be ignored as it is impossible to be carried out in respect of a company. This appears to be the intention of the legislature and we find no difficulty in construing the statute in such a way. We do not think that there is a blanket immunity for any company from any prosecution for serious offences merely because the prosecution would ultimately entail a sentence of ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l justice system in the Country, no order imposing penalty may be made unless the company has been given a reasonable opportunity of being heard. 20. The Companies Act may lay down the maximum as well as minimum quantum of penalty for a particular offence. However, the Act should also provide that while levying a particular quantum of penalty, the levying authority shall also take into consideration the size of company, nature of business, injury to public interest, nature & gravity of default, repetition of default etc. 30. Any compoundable offence under the Act may, either before or after the institution or proceedings, be compounded at any stage of the proceedings. The Act may suitably prescribe the scale of compounding fees and the authority empowered to compound. The Government of India in the meanwhile vide Order No.3/39/2005/CUI dated 04.05.2005 constituted an Expert Group to examine issues relating to the streamlining of the prosecution mechanism under the Companies Act, 1956 to make it more effective and to advise on the following, inter alia to identify categories of offences for which cases filed for violations of Companies Act, 1956 and reasons for excessive penden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liance or violations including fraudulent conduct should invite stringent/deterrent provisions like imprisonment". There is a varied experience internationally, where a separate and a more liberal penalty and compliance regime has been laid down for companies which are small in size in terms of their business though a differentiated treatment with a higher liability for statutory annual filings is also seen in some jurisdictions, for example UK, presumably to ensure a high rate of compliance. 28.7 section 454 of the Act provides for an in-house framework for prompt administration of penalties on detection of an offence by Registrar of Companies. The Committee while examining suggestions to reduce penalties under the mechanism noted that there are twenty sections in the Act, which are subject to the adjudication mechanism prescribed under section 454. The said sections have a maximum penalty of rupees one lakh, and in most cases, the penalty is a fixed amount linked to number of days of default (for example, rupees one thousand per day of non-compliance) etc., thus not providing much discretion to the adjudicating officers. In the case of section 42, the penalty provided is very h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hus, for the leniency and ease in administration of the Act, the old provisions relating to compounding may be re-instated. Therefore, under sub-section (1), the Tribunal should have the power to compound offences punishable with fine as well as offences punishable with imprisonment or fine or both. Thus a study of judicial precedents as set forth by the Hon'ble Supreme Court in the case of Standard Chartered Bank (supra) read along with the various committee report clearly points out to the following: -- (a) That in the case of economic offences committed by a juristic person, including companies, the corporate entity would be invariably required to face penal consequences in relation to statutory offences with fines, though not with imprisonment, which if circumstances warrant can be imposed on the individuals who are in default in addition to the corporate entity; (b) In view of the same and based on recommendations of Law Commission as cited in the above judgement as well as several committees constituted by the Government of India, the present Companies Act, 2013, has to a great extent, under the relevant provisions has prescribed the minimum and maximum amount of fine wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... book on Guide to the Companies Act though in relation to the 1956 Act and section 621-A contained therein is quite apposite to compounding presently as well and which is to the following effect: "The power of compounding the offence is discretionary as the expression used in sub-section (1) is "may". It is open to the company or the officer-in-default not to move for composition of the offence complained against and which is pending in a Court of law and, instead, claimed to be tried by the Court. However, once the Company or the officer-in-default opts to seek composition and the Regional Director or the Company Law Board, as the case may be, is agreeable therefor, the complainant i.e. the Registrar or 5EBI or the shareholder or the officer of Central Government authorized in this behalf, cannot enforce the remedy through the court. Once the offence is compounded, no prosecution can be filed in the court for the very same offence." Thus it is seen that going for composition of an offence is purely a voluntary act on the part of the applicant and even in relation to a particular default/offence, it is up to the defaulters to either opt or not to opt for compounding. Further, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at 553)" It further observed as under: "If there is obvious anomaly in the application of law the Court could shape the law to remove the anomaly. If the strict grammatical interpretation gives rise to absurdity or inconsistency, the Court could discard such interpretation and adopt an interpretation which will give effect to the purpose of the legislature. That could be done, if necessary even by modification of the language used. (See Mahadeolal Kanodia v. The Administrator General of West Bengal (1950) 3 SCR 578; (AIR 1960 SC 936). The legislators do not always deal with specific controversies which the Courts decide. They incorporate general purpose behind the statutory words and it is for the court to decide specific cases. If a given case is well within the general purpose of the legislature but not within the literal meaning of the statute, then the Court must strike the balance." The intention of the Legislature is quite evident from the manner in which it has fixed the minimum and maximum fine for the defaulting company as well as delineating the jurisdiction for compounding based on maximum fine fixed for an offence. Though the provision is silent on the aspect whethe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -default, the authority for compounding such offences shall be within the domain of the Regional Director; (d) In relation to Offences as are listed in Table III(a) of this Order i.e. in the case of continuing default where the maximum amount of fine exceeds five lakh rupees in relation to the defaulting company or in the absence of fine being prescribed in relation to the defaulting company, in relation to each of the officers-in-default taken individually if it exceeds the said limit, then in such cases, for composition, it shall be forwarded by the Registrar of Companies to this Tribunal and the rest to the Regional Director; (e) In relation to Offences as are listed in Table III(b) of this Order and those offences that are similarly placed, if any, where upon computation of maximum fine as derived by multiplying the per day fine prescribed by the number of days default or such other like variable and the product being the resultant figure arising out of such computation, if it exceeds five lakh rupees, the compounding application shall be forwarded to this Tribunal by the Registrar of Companies and not otherwise; (f) Where no fine has been prescribed for the defaulting co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation being filed at the discretion of the companies concerned. Again, under section 244 of the 2013 Act in relation to an application filed for oppression and mismanagement under section 241, a joint application is envisaged. The same is the case with the class actions where a joint application is contemplated and is provided for under section 245 of the 2013 Act. Learned Counsels for the applicants submitted that by virtue of Rule 11 of NCLT Rules read with Rule 14 of the said Rules, this Tribunal should provide exemption from Rule 23A of NCLT Rules as extracted above. However, in granting such an exemption if at all it can be granted, this Tribunal is required to consider the same on a case by case basis taking into consideration the merits of each case and the exemption cannot be granted carte blanche relating to all applications filed under section 441 of the 2013 Act. For e.g. in relation to Application CP-16/144/ND/2017, it is seen that compounding is sought for 2 years continuous default in complying with the provisions of section 137 of the 2013 Act in filing Annual Financial Statements by 5 persons including the defaulting Company. However, in relation to one of the yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount of fine for such offence in addition to any imprisonment provided for that offence. Thus, taking into consideration the provisions of section 441(6)(b) of 2013 Act, repeated defaults go outside the purview of compounding as it attracts, if a particular section warrants for its default in compliance, fine or imprisonment and since repeated defaulters are compulsorily made punishable with fine of twice the amount as well as with imprisonment. To demonstrate with an example, non-compliance with filing of annual returns under section 92 of 2013 Act attracts a fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees in the case of the defaulting company, whereas, in the case of every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees, or with both. Thus, a first-time default on the part of the defaulting company and its officers becomes compoundable, but if the same offence/default is repeated within a period of three years i.e. say in the present instance by non-f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sently and hence the abovesaid decisions can be distinguished and cannot be quoted as precedents. Further, in order to also avoid repeated defaulters from getting away from prosecution as rightly contended by the Registrar of Companies at the time of oral submissions, as the punishment for non-compliance has been made more stringent and to further the objects of the 2013 Act in making the companies compliant to the provisions of the Act relating to compliances and also not to make the provisions of section 441(2) nugatory, as otherwise it will lead to compliance with the provisions of Act in fits and starts and not continuous, a joint application even in relation to offences for which fine is the only punishment cannot be entertained and continuous or repeated defaulters cannot be given a moratorium from prosecution. For example, in relation to convening of Annual General Meeting as provided for under section 96 of the 2013 Act and for its default, section 99 of the Act provides for only a fine in relation to both the company and its officers -in-default, and hence does not fall within the ambit of provisions of section 451 of the 2013 Act. In the circumstances can a defaulting com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... give under Issue No.3 as above. This is evident from a perusal of facts in relation to CP.No.16/126/ND/2017 taken together with computation of maximum fine computed for the purpose of compounding as given in Annexure 11 by the ROC in relation to the default in filing Annual Returns stretching over four years, i.e. two years default arising under the 1956 Act and the balance two years under the present Act of 2013. While under the 1956 Act, non filing of Annual Returns was visited with a fine of Rs. 500/- for each day of default with no maximum cap, in relation to the 2013 Act the minimum fine prescribed is to the extent of Rs. 50,000/- and the maximum fine prescribed is Rs. 500,000/-. While under the 2013 Act the maximum fine prescribed being not in excess of five lakh rupees and the compounding authority being the Regional Director by virtue of section 441(l)(b), under the 1956 Act since the fine computed exceeds Rs. 50,000/- the jurisdiction was earlier vested with Company Law Board and presently this Tribunal. Thus the anomaly of filing a joint application in relation to a similar offence spread over the erstwhile Act of 1956 and presently of 2013 Act which if accepted as that o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 Act) and 92 (2013 Act) 1 9 4 18 CP-16/142/ND/2017 159 (1956 Act) and 92 (2013 Act) 1 3 2 19 CP-16/141/ND/2017 220 (1956 Act) and 137 (2013 Act) 1 3 2 20 CP-16/133/ND/2017 166 (1956 Act) and 96 (2013 Act) 1 7 1 21 CP-16/132/ND/2017 220 (1956 Act) and 137 (2013 Act) 1 7 3 22 CP-16/134/ND/2017 166 (1956 Act) and 96 (2013 Act) 1 5 Provision wrongly stated, AGM convened 23 CP-16/144/ND/2017 137 (2013 Act) 1 5 2 DECISION: (i) In relation to CP-16/176/ND/2017, CP-16/181/ND/2017, CP-16/124/ND/2017, CP-16/126/ND/2017 and CP-16/142/ND/2017 the defaulted provisions being section 92 of the Companies Act, 2013 and/or the equivalent provision under the earlier Act of 1956 since repealed as the case may be cannot be entertained in view of the following: -- (a) Since all the five applications as listed above pertains to default in relation to filing of Annual Returns which is required to be filed for each year and the default is in relation to more than a year and as the same offence had been committed for the second or subsequent occasions within a period of three years and as the defaulted section being section 92 provides for fine or imprisonment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s dismissed but without costs. (iii) In relation to CP-16/178/ND/2017, CP-16/182/ND/2017, CP-16/130/ND/2017, CP-16/122/ND/2017 and CP-16/125/ND/2017 concerning defaults arising out of Sections 96 read with section 99 of Companies Act, 2013 or the equivalent provisions under the earlier Act of 1956, since repealed and the maximum fine amount provided in section 99 being Rs. 100,000/- in addition to fine which may extend to Rs. 5000/- for each day of default during which the offence continuous and as the maximum amount of fine computed by the Registrar in its report forwarded and extracted as Annexures 1, 5, 9, 12, and 13 respectively discloses that in relation to each of the defaulting company, in the respective petitions exceeds five lakh rupees, the above five petitions as detailed in this paragraph are being taken up for consideration by this Tribunal and is dismissed as not maintainable, in view of the position that the offence relates to non-convening of Annual General Meeting for each of the relevant years as reflected against each of the petition in the above table and as joint petitions for repeated defaults as enunciated and answered in light of Issue No.3 in paragraphs s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the 2013 Act and the Regional Director shall dispose of the company petition CP-16/179/ND/2017 in light of this order and in accordance with its merit. (vii) In relation to CP-16/177/ND/2017, the defaulted provisions being section 149 of the Companies Act, 2013 read with section 172 of the said Act and as the maximum amount of fine prescribed in relation to the defaulting company or in relation to the officers-in-default does not individually exceed five lakh rupees as can be seen from the computation of the Registrar of Companies in its report forwarded to this Tribunal and as reflected in the earlier part of this order while narrating the facts, thereby falling within the compounding jurisdiction of the Regional Director, the Registry of this Tribunal is directed to return the files in CP-16/177/ND/2017 to the Registrar of Companies along with its report, if available on record, to be suitably forwarded to the Regional Director as provided under section 441(l)(b) of the 2013 Act and the Regional Director shall dispose of the company petition CP-16/177/ND/2017 in light of this order and in accordance with its merit. (viii) In relation to CP-16/175/ND/2017, the defaulted pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2016 806+441+78= 1325 1,00,000/= +5000/- per day 67,20,000/= For F.Y 2014-15 01.10.2015 to 18.12.2016 For F.Y 2015-16 01.10.2016 to 19.12.2016 2 Mr. Osamu Sugimura For F.Y 2013-14 01.10.2014 to 17.12.2016 806+441+78= 1325 days 1,00,000/=+5000/- per day 67,20,000/= For F.Y 2014-15 01.10.2015 to 18.12.2016 For F.Y 2015-16 01.10.2016 to 19.12.2016 3 Mr. MasakiKa shiwagi For F.Y 2013-14 01.10.2014 to 17.12.2016 806+441+78= 1325 1,00,000/=+5000/- per day 67,20,000/= For F.Y 2014-15 01.10.2015 to 18.12.2016 For F.Y 2015-16 01.10.2016 to 19.12.2016 4. Mr. KazuaHatsuda For F.Y.2013-14 01.10.2014 to 12.08.2015 314 days 1,00,000/- +5000/- per day 16,65,000/- 5 Mr. MasakazuMukaide For F.Y 2013-14 12.08.2015 to 17.12.2016 492+441+78= 1011 days 1,00,000/- +5000/- per day 51,50,000/- For F.Y 2014-15 01.10.2015 to 18.12.2016 For F.Y 2015-16 01.10.2016 to 19.12.2016 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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