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In Re: Hoffland Finance Ltd. Versus Unknown

1997 (5) TMI 435 - COMPANY LAW BOARD

Dated:- 12-5-1997 - P Majumdar, S Balasubramanian And C Das, JJ. ORDER 1. Hoffland Finance Limited has filed an application for compounding, duly forwarded by the Registrar of Companies, National Capital Territory of Delhi and Haryana under Section 621A of the Companies Act, 1956 (hereinafter referred to as "the Act"), for contravention of Section 68(a) and 68(b) of the Act. The Registrar of Companies has already filed a prosecution against the company and five of its delinquent direct .....

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nal court where the proceeding was pending. Accordingly, the applicants were directed to obtain permission of the concerned criminal court and pursuant to the said direction the applicants moved an application before the Additional Chief Metropolitan Magistrate, Delhi, for permission to compound the offence. It appears that the learned Magistrate, while hearing the said application made an order that the jurisdiction of the court comes into operation only after the parties had compounded the off .....

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ion Bench of the Company Law Board in the case of Reliance Industries Ltd., In re [1997] 89 Comp Cas 67 had observed that the question of seeking permission of the court would arise only after compounding is done by the Company Law Board and accordingly compounded the offences. The learned member of the Company Law Board found that in a prior case, the Northern Region Bench of the Company Law Board, while considering a similar default under Section 68(a) and (b) of the Act, directed the defaulte .....

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k the view that this question should be considered and decided by a larger Bench to be constituted by the chairman of the Company Law Board. Accordingly, the present Bench is being constituted to consider and decide the short question, i.e., whether before compounding of any offences punishable under the Act, the Company Law Board could compound the offence without directing the accused or defaulter to obtain permission of the trial court where the prosecution was pending, and upon obtaining suc .....

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and (7) are independent of each other and that while Sub-section (1) confers jurisdiction upon the Company Law Board, Sub-section (7) confers concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. He dwelt in detail on, various reasons in support of his proposition, which we have taken into consideration in deciding the issue before us. 5. We have heard the submissions of learned counsel for the applicants and also we have given our anxious cons .....

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ave been provided in the Companies Act. 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 31, 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 a shareholder of the company or a person authorised by the Central Gover .....

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s of a court so as to empower them to take cognisance of and to impose penalties for, any infraction of certain specified provisions of the Act. 7. When this section was introduced, the Notes on Clauses stated "this clause empowers the Company Law Board and the Regional Director to compound offences punishable with fine, by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance with law. The power to compound shall not be exercisable by the Company Law .....

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nferred on the court. 8. In the background of what has been discussed above we shall proceed to examine the issues before us. We set out Section 621A of the Companies Act hereinbelow : "621A. 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 als .....

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y 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 offence committed by a company or its officer within a period of three years from the date on which a simi .....

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rs to compound an offence, subject to the direction, control and supervision of the Company Law Board. (4) (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 Company Law Board or the regional director, as the case may be. (b) Where any offence is compounded under this section, whether before or after the institution of any prosecution, an intimation thereof shall be given by the company to .....

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ion, such composition shall be brought by the Registrar in writing, to the notice of the court in which the prosecution is pending and on such notice of the composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. (5) The Company Law Board or the regional director, as the case may be, while dealing with a proposal for the compounding of an offence for a default in compliance with any provision of this Act which requi .....

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ly 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 w .....

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is Act, not being an offence punishable with imprisonment only or with imprisonment and also with fine as has been contemplated under Sub-section (1) of Section 621A of the Act. However, in view of Section 621A(1)(b) the Regional Director can compound only offences punishable with a maximum fine of ₹ 5,000. Sub-section (4)(a) to (4)(d) of Section 621A of the Act, inter alia, provide that every application for the compounding of an offence shall be made to the Registrar, who shall forward t .....

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ituted in relation to such offence either by the Registrar or by the Central Government against the offender in relation to whom an offence is so compounded. Sub-section (4)(d) of Section 621A of the Act provides that where the composition of any offence is made after the institution of any prosecution, such composition shall be brought by the Registrar in writing to the notice of the court in which the prosecution is pending and on such notice of the composition of the offence being given, the .....

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been pending before any criminal court, the Company Law Board is not required to direct the party to obtain permission of the criminal court where the proceeding is pending and the Company Law Board is not debarred in any manner to compound any offence in accordance with the procedure as contemplated by Section 621A of the Act and there is no question of obtaining any permission of the criminal court, where any proceeding relating to the offence is pending before any criminal court. It further .....

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b-section (7) of Section 621A also provides a non-obstante clause "notwithstanding anything contained in the Code of Criminal Procedure, 1973". In our view, a specific power or authority has been vested in the Company Law Board or the Regional Director, as the case may be, under Section 621A of the Act to compound any offence punishable under this Act committed by a company or any officer thereof, not being an offence punishable with imprisonment only, or with imprisonment and also wit .....

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n is pending. There is no such expression "with the permission of the court" in Sub-section (1) of Section 621A or any of the Sub-sections (2) to (6) of Section 621A of the Act. 12. Now, let us come to Sub-section (7) of Section 621A of the Act. We find that this sub-section also starts with a non-obstante clause. Here, under Sub-section (7)(a) of Section 621A it is provided that any offence which is punishable under the Act, the Companies Act, 1956, with imprisonment or with fine or w .....

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-sections of Section 621A of the Act. 13. Now let us examine how different is the procedure laid down by the Companies Act, and the Code : Companies Act (Section 621A) : 1. A person who commits an offence applies to the Company Law Board through the Registrar. 2. He can apply before or after the prosecution is launched. 3. The quantum of amount for compounding an offence decided by the Company Law Board. Code of Criminal Procedure (Section 320) : 1. It is the complainant or the person injured wh .....

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Board for compounding an offence which is punishable with imprisonment or fine or with both, before prosecution is launched, and if as per Sub-section (7), the permission of the court is necessary, the immediate question that would arise is, how a court would take cognisance of an application for permission without any prosecution pending before it and as a matter of fact Sub-section (4)(c) prohibits institution of prosecution after the compounding is done by the Company Law Board/Regional Direc .....

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multaneously decides the quantum of composition fee also subject to the limits as fixed in Sub-section (1). In case the Company Law Board decides against composition, it is nothing but refusal to grant permission. Thus, the view that further permission as per Sub-section (7) from the court is necessary, does not seem to be correct. Such interpretation would also result in irreconcilable jurisdictional problems. The Company Law Board is a quasi-judicial body exercising powers conferred on it by v .....

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y Law Board, at its discretion may not compound the offence, as the permission granted by the court is not binding on the Company Law Board. If the intention of the Legislature were to subject the Company Law Board jurisdiction to permission from the court, the same could have been most appropriately achieved by making the provisions of Sub-section (7) a proviso to Sub-section (1) itself. Not only is there no such proviso in that sub-section, but, right through to Sub-section (6) there is nothin .....

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stion of applying to the court for permission after the compounding order is issued by the Company Law Board does not arise as he stands discharged when the fact of compounding is brought to the notice of the court. 17. Thus, if we take into consideration all these aspects, keeping in mind that the Company Law Board is a quasi-judicial body, the inescapable conclusion one has to arrive at is that, exercise of powers by the Company Law Board under Sub-section (1), is not subject to the provisions .....

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l court with the permission of the court under this enabling Sub-section (7) of Section 621A of this Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence should be relatable to the offence punishable with imprisonment or with fine or with both. The tenor of Sub-section (7) of Section 621A of the Act is, to our mind, that under this Sub-section (7) the offences punishable with imprisonment or with fine or with both shall be compoundab .....

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fine or with both it shall be compoundable with the permission of the court in accordance with the procedure laid down in that Act, the Code of Criminal Procedure, for compounding of offences. Thus, such compounding of offences is entirely in the arena of the criminal court in which the prosecution is pending and such compounding of offences would be done in accordance with the procedure laid down in the Code of Criminal Procedure. It is also an option left with the concerned party to have the o .....

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ffence may be proceeded with before the criminal court with the sanction of the court. It may be noticed that under Section 320 of the Criminal Procedure Code offences under the Indian Penal Code, can only be compounded in accordance with the procedure laid down in the Code of Criminal Procedure. In our view, Sub-section (7) of Section 621A is an enabling provision under which the parties may have the offences compounded in the criminal court in accordance with the procedure laid down in the Cri .....

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ompanies Act or any other law. Now under Sub-section (7) of Section 621A of the Companies Act, such compoundable offences committed under this Act punishable with imprisonment or with fine or with both can be compounded in the criminal court where the prosecution relating to the offence is pending, but such compounding can be done in accordance with the procedure laid down in the Criminal Procedure Code and with the sanction of the court. Sub-section (7)(b) of Section 621A of the Act makes it cl .....

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