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TMI Blog2019 (5) TMI 1076X X X X Extracts X X X X X X X X Extracts X X X X ..... oters / persons in management and other related persons of M/s Satyam Computers Limited, inspection of books and accounts were ordered by the Ministry of Corporate Affairs, invoking Section 209-A of the 1956 Act and the task was entrusted to Serious Fraud Investigation Office, the appellant herein, authorizing them to file complaints under various provisions of the said Act. The Serious Fraud Investigation Office, after completion of investigation, launched prosecution before the Economic Offences Court, Hyderabad against the respondent company and its directors. During the pendency of the said prosecution cases, the respondents and its directors, who are accused, approached the Company Law Board (CLB) by way of Company Application No. 183 of 2015, admitting violations and therefore, seeking to compound the contravention of the provisions of Section 297 of the Act. The alleged contravention is that the respondent had not obtained prior approval of the Central Government before entering into contract with (a) M/s Maytas Properties Private Limited on 04.02.2006 for design, procurement and execution of civil work for development of an integrated residential township etc.; (b) M/s Mayt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to appreciate the fact that the respondent had admitted committing the offences. The evidence on record coupled with admission of the respondent disentitles it from compounding the offences and thus granting discharge from the criminal case; c) the CLB failed to appreciate the fact that the violations committed by the respondent are of serious nature and the consequences of ordering compounding of offences; and d) the CLB failed to appreciate the principles laid down by the Supreme Court in JIK Industries Limited v. Amarlal V.Jumani (2012) 3 SCC 255. On the other hand, learned Senior Counsel Sri L. Ravichander appearing for the respondent - applicant submits that the scope of Appeal under Section 10(F) of the 1956 Act is limited for consideration of the substantial question of law raised before this Court. The learned Senior Counsel would assert that the question of law said to have arisen from the order of the CLB is not at all a substantial question of law, as, essentially, what the appellant questions is the discretionary power vested in the CLB and re-appreciation of the facts to arrive at a different conclusion than the one already recorded by the CLB is impermissible. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record before ordering compounding does not stand scrutiny. Further, it is not the case of the appellant that the lacks jurisdiction in ordering compounding of offences. The judgment of the Supreme Court in JIK Industries' case, referred to by the learned counsel for the appellant is distinguishable and not applicable to the present case. Firstly, it may be noted that the 8 said judgment is in relation to exercising the discretion by the Criminal Court in compounding the offences arising in cheque bounce cases under Section 138 read with 141 of the Negotiable Instruments Act, 1881, and not in the cases arising under the provisions of the Companies Act. Secondly, compounding of offences under the Negotiable Instruments Act was on account of the guidelines framed by the Supreme Court in M/s Damodar S. Prabhu v. Sayed Babalal H (2010) 5 SCC 663. However, the Hon'ble Supreme Court in Damodar's case, in exercise of the jurisdiction under Article 142 of the Constitution, in order to fill up the legislative vacuum, framed guidelines allowing compounding of offences under Section 320 of the Code of Criminal Procedure. The Supreme Court in JIK Industries case (cited supra) found that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " Section 621-A: Composition of certain 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 the Central Government on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that the Government may prescribe: Provided that the sum prescribed 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 prescribing the sum required to be paid or credited for the compounding of an offence under this sub-section, the sum if any paid by way of additional feel under sub-section (2) of Section 611 shall be taken into account. (2) Nothing in sub-section (1) shall apply to an offence committed by a company or its officer within a period three years from the date on which a similar offence committed by it or him was compounded un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 (2 of 1974) 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." In this context, it is pertinent to note that Section 621A itself came to be introduced by the Companies (Amendment) Act, 1988. The objective of introducing the compounding provision in the Act is to reduce litigation in the Courts as the offences under the Act are generally of technical nature. The Section itself is brought into existence following the recommendations of SACHAR Committee which had suggested providing for realization of fines through Court proceedings by a system of penalty as provided in the Income Tax Act by conferring power on the Registrar, CLB by clothing the powers of a Court. In the absence of any specific restriction, the CLB is entitled to consider fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alid rationale. The whole purpose of the guidelines is to ensure that the time and effort of the regulator is devoted to cases which duly merit trial and enforcement. The guidelines thus recognise an enabling power in SEBI to resolve certain cases which in the view of SEBI can be set at rest without compromising either an issue of principle or public interest." In N.H. Securities Ltd. v. SEBI 2018 SCC Online Bombay 4040, the petition was filed to quash the order passed by the Special Court rejecting the application made by the petitioner under Section 24A of the Act. The Bombay High Court relying on Shilpa Stock Broker case (supra) dismissed the said petition and came to the conclusion that: " Section 24A of the SEBI Act indeed stipulates that notwithstanding anything contained in the Code of Criminal Procedure any offence punishable under the SEBI Act not being an offence punishable with imprisonment only or with imprisonment or also with fine may either before or after the institution of any proceedings be compounded by Securities Appellate Tribunal or Court before which such proceedings are pending. The interpretation of the said provision would not mean that whenever an ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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