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TMI Blog2025 (2) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... ompanies Act, 1956 which is not disputed by either party.
The Appellant has contended that the mistake is inadvertent, that he himself has found out the mistake and has sought to rectify it by seeking composition of the offence, that he has failed to file the Board Report with ROC only, and that it has been circulated to shareholders within the due date, that the omission is not prejudicial to the interest of members, creditors, regulators or other stakeholders and that the content of the Board Reports was such that there is nothing to hide - In view of absence of any assertion to the contrary by the Respondent, the above contention is acceptable.
Conclusion - The offences were committed for the financial year 2010-11 and financial year 2013-14 under Section 220 of the Companies Act, 1956 only and that penalty levied for compounding appears excessive in view of orders issued by the same Ld. Tribunal and other Tribunals in similar cases and therefore penalty should be levied at the rate of Rs.50 per day for every day during which the default continued, both for the company and for the directors.
Appeal allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... rt as above in violation of Section 220 of the Companies Act 1956. f. The Registrar of Companies, Bengaluru prepared its report and forwarded the same to the learned NCLT, Bengaluru Bench. The said application came to be numbered as C.P No. 611/BB/2018 before the learned NCLT, Bengaluru Bench. The learned NCLT, Bengaluru Bench after hearing both sides passed the Impugned Order on 31.12.2018 in CP No.611/BB/2018. 3. Appellant's submissions a. The Learned counsel for the Appellant submits that he had moved the compounding Application Suo-Moto and no show cause notice was ever received by the Appellant from any statutory authority in regard to the offences committed. Further, the said lapse was inadvertent as the Board Report for the relevant financial years was duly prepared and placed before the Annual General Meeting but could not be attached to the documents filed before the Registrar of Companies (ROC), and that he had filed the rest of the financial statements of the relevant financial years, within the stipulated time. b. He further states that in most cases, the proceedings before learned NCLT have been drawn after the institution of Criminal Complaint by the Registrar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made applicable to the offences committed and punishable under the provisions of Companies Act, 1956. h. He has further submitted that learned NCLT, Bengaluru has compounded the offences at the rate of 20% and 30% of the maximum penalty leviable in the case of the company and each Director respectively for the period it deemed to be covered under the Companies Act, 1956. Further, it has compounded the offences @ 50% on the company and 58.78% on each Director for the period it deemed to be covered under the Companies Act, 2013. He has contended that the rate of penalty is excessive & that applying provisions of the Companies Act, 2013, for the instant case is erroneous and needs to be rectified. i. The learned counsel for the Appellant has relied upon the Judgment, Goyal Vegolis Limited & Ors. Vs ROC, Jaipur [Company Appeal (AT) No.419 of 2018; Hon'ble NCLAT, Chairperson's Court], and has prayed for a grant of relief on similar lines for compounding the offence in this case. 4. Respondent's Submissions a. The Respondent has contended that in the said application by the Appellant, it has been admitted that the company failed to attach the Board report to the balance sheet for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 of the Companies Act, 1956, and for the financial year 2013-2014 as per Section 137(3) of the Companies Act, 2013. Analysis and Findings: 5. It is an admitted fact that the Appellants 1, 2 & 3 have failed to file Board Report with the financial statement for the financial years 2010-11 and 2013-14 respectively within the stipulated time and hence the offences have been committed. They have to be taken as a continuing offence. Penalty for Non-filing of Board Report for financial year ending on 31.03.2011 will be determined as per the provisions of Section 220 r/w Section 162 of the Companies Act, 1956 which is not disputed by either party. 6. Appellant claims that non-filing of the Board Report for the financial year ending on 31.03.2014 should also attract provisions of Section 220 of the Companies Act 1956 as this pertains to the financial year 2013-14 and as per the General Circular 8/2014 of the Ministry of Corporate Affairs dated 04.04.2014. The relevant portion of the said Circular No.1/19/2013-CL-V of Ministry of Corporate Affairs, Government of India dated is extracted below: "A number of provisions of the Companies Act, 2013 Including those relating to maintenance o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.4.2014. Therefore, the said provision can not be made applicable for the offence committed during the financial year ending 31.3.2014. Learned NCLT failed to consider the aforesaid provision and compounded the offence in terms of Sub- Section (8) of Section 134 of Companies Act, 2013 which was not applicable for the financial year ending 31.3.2014. This also appears to have been committed because of wrong report given by the Registrar of Companies." This contention of the Appellant is sought to be controverted by the Respondent stating that Board Report for the financial year 2013-14 was due to be filed by 26.10.2014 and therefore penalty for compounding the offence for not filing the correct financial statement has to be calculated under Section 137(3) of the Companies Act, 2013. However, this may not be acceptable in light of the Circular dated 04.04.2014 of the Ministry of Corporate Affairs and the Judgment of this Tribunal (Supra). It is to be held that filing of the said financial statement/ board report pertained to financial year 2013-14 only and hence non-filing of the same will have to be dealt with under the relevant provisions of the Companies Act, 1956. 7. Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed citing the judgment of Hon'ble Apex Court in the matter of T.Barai Vs. Henry AH Hoe and Anr. (1983 AIR 150) that he may be granted the benefit of the Rule of Beneficial Construction. It is to be noted that the said amendment in the Companies Act came into effect on 21.12.2020 while Ld. NCLT passed orders on 31.12.2018. Hence, this rule will not be applicable in the instant case. 9. Summarising it is to be held that offences were committed for the financial year 2010-11 and financial year 2013-14 under Section 220 of the Companies Act, 1956 only and that penalty levied for compounding appears excessive in view of orders issued by the same Ld. Tribunal and other Tribunals in similar cases and therefore penalty should be levied at the rate of Rs.50 per day for every day during which the default continued, both for the company and for the directors. 10. Accordingly, the compounding fees are to be levied will be as under : S.No. Offence / Particulars Days of violations Penalty / Compounding Fees Appellant 1 Appellant 2 Appellant 3 1 Violation of Section 220 for FY 2010-11 2007 50 x 2007 1,00,350/- 50 x 2007 1,00,350/- 50 x 2007 1,00,350/- 2 Violation of Section 220 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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