TMI Blog2018 (3) TMI 1292X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under the 1956 Act as well as 2013 Act filed is also not maintainable in view of the position as enunciated and dealt with under Issue No.4 supra. (c) In any case under the 2013 Act since the maximum amount of fine prescribed for the offence of not filing annual returns is not in excess of five lakh rupees, this Tribunal lacks the pecuniary jurisdiction to entertain the compounding applications as listed above - Company Application No. CP-16/176/ND/2017, Company Application No. CP-16/178/ND/2017, Company Application No. CP-16/174/ND/2017, Company Application No. CP-16/177/ND/2017 And Company Application No. CP-16/175/ND/2017 - - - Dated:- 16-2-2018 - MR. R. VARADHARAJAN, J. Company Application No. CP-16/181/ND/2017, Company Application No. CP-16/182/ND/2017, Company Application No. CP-16/179/ND/2017, Company Application No. CP-16/180/ND/2017, Company Application No. CP-16/121/ND/2017, Company Application No. CP-16/130/ND/2017, Company Application No. CP-16/124/ND/2017, Company Application No. CP-16/126/ND/2017, Company Application No. CP-16/122/ND/2017, Company Application No. CP-16/125/ND/2017, Company Application No. CP-16/123/ND/2017, Company Application No. CP-16/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, were there has been a default committed on the part of the defaulters for more than a year, and in relation to such repetitive defaults whether a joint application for compounding is maintainable before this Tribunal in view of section 451 of the Companies Act, 2013 read with section 441(6) and/or section 441(2) of the said Act? iv. Whether a common application is maintainable in relation to a particular non-compliance, of say, filing of annual returns, arising out of both the provisions of 1956 Act as well as 2013 Act in view of the Scheme of levy of penalty being relatively different as compared to each other for the defaults committed under the respective Acts and the pecuniary limits prescribed for the respective compounding authorities to entertain a compounding application also being different? Even though the questions confronting this Tribunal is invariably common, each of the applications as listed above provide a unique set of facts relevant to the above questions of law and hence in relation to each of these applications, facts are narrated in brief and the maximum amount of fine computed by Registrar under each of the relevant sections of the 2013 Act or as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s sought to aggregate the maximum fine prescribed for all the three years and for each of the defaulters for the defaulting period and has quantified as given in Annexure-1 of this order. 3) Company Application No. CP-16/174/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 137 in filing its Balance Sheet and Profit Loss Account for the financial years 2013-2014 and 2014-15. The penalty in relation to the defaulting company as prescribed under section 137 is to the minimum extent of ₹ 1,000/- for per day during which the failure continues, but which shall not be more than ten lakh rupees. In relation to the Managing Director and its Chief Financial Officer of the company, if any, and in their absence any other director who has been charged with compliance under the instant provision and in its absence, all the directors of the defaulting 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 lakhs rupees, or with both. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thousand rupees and if the contravention being a continuing one, with a further fine which may extend to one thousand rupees for every day after the first during which the contravention continues. In view of a joint application having been filed both in terms of offence committed for three different years as well as jointly by all the five defaulters, as against each of the defaulters, the Registrar of Companies, NCT of Delhi Haryana has sought to aggregate the maximum amount of fine prescribed for the defaulting periods under the section for each of the defaulters and has quantified as given in Annexure-3 of this order. 6) Company Petition No. CP-16/181/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 2012-13 (1172 days default), 2013-2014 (838 days default), 2014-15 (516 days defa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irections 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 four 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-5 of this order. 8) Company Petition No. CP-16/179/NP/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 2.10 of the Companies Act 1956 and under section 129 of the Companies Act, 2013 for not approving and adopting the Financial Statements of the Company for the financial years 2012-13 (523 days default), 2013-2014 (874 days default), 2014-15 (576 days default) and 2015-16 (266 da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here the annual general meeting of a company for any year has not been held, they 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 but which may extend to five lakh rup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 99 by way of fine is to the extent of one lakh rupees and in the case of a continuing default with a further fine which may extend to five thousand rupees for every day of default. In view of a joint application having been filed both in terms of offence committed for three different, years as well as jointly by all the five applicants, the Registrar of Companies, NCT of Delhi Haryana has sought to aggregate the maximum fine prescribed for all the three years and for each of the defaulters for the defaulting period and has quantified as given in Annexure-9 of this order. 12) Company Petition No. CP-16/124/ND/2017 The applicant company along with eight 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 31.12.2012, 31.03.2014, 31.03.20 and 31.03.2016. As per section 162 of the 1956 Act, if a company fails to comply with any of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 relevant Sections as well as for each of the defaulters for the defaulting periods and has quantified as given in Annexure-11 of this order. 14) Company Petition No. CP-16/122/ND/2017 The applicant company along with eight 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 failure in holding its Annual General Meeting for the financial years 31.12.2012, 31.03.2014, 31.03.2015 and 31.03.2016. 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 tho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a continuing default, with a further fine which may extend to five thousand rupees per 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 ten 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-13 of this order. 16) Company Petition No. CP-16/123/ND/2017 The applicant company along with eight of its directors have filed suo-moto the above application for compounding the violation in compliance with the provisions of section 220 of the Companies Act 1956 and under section 137 of the Companies Act, 2013 in relation to default in filing Balance Sheet and Profit Loss account for the financial years ending 31.12.2012, 31.03.2014, 31.03.2015 and 31.03.2016. The provision and penalty in relation to the defaulting company as prescribed under section 220(1) of the Companies Act, 1956 provides that after the Balance Sheet and Profit Loss account have been laid before a company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y as prescribed under section 220(1) of the Companies Act, 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 the profit 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 a fine of one thousand rupees for per day of default 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 othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as well as for each of the defaulters for the defaulting periods and has quantified as given in Annexure-16 of this order. 19) Company Petition No. CP-16/141/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 220 of the Companies Act 1956 and under section 137 of the Companies Act, 2013 in relation to default in filing Balance Sheet and Profit Loss account for the financial years 2013-14 and 2014-15. The provision and penalty in relation to the defaulting company as prescribed under section 220(1) of the Companies Act, 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 the profit 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 provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies 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 the particular year as well as jointly by all the eight applicants, the Registrar of Companies, NCT of Delhi Haryana has sought to aggregate the maximum fine prescribed for year 2014-15 and for each of the defaulters for the defaulting period and has quantified as given in Annexure-18 of this order. 21) Company Petition No. CP-16/132/ND/2017 The applicant company along with seven of its directors have filed suo-moto the above application for compounding the violation in compliance with the provisions of section 220 of the Companies Act 1956 and under section 137 of the Companies Act, 2013 in relation to default in filing Balance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 every day after 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for compounding, though in relation to offences committed under different provisions of the Act, be that of 1956 or 2013, by the respective Applicants has been filed under the provisions of section 441 of the Companies Act, 2013 (Act) and it will be appropriate at this stage to refer to the said provision of the Act in some detail and hence it is reproduced hereunder for ready reference: 441. Compounding 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) with fine only, may, either before or after the institution of any prosecution, be compounded by-- (a) the Tribunal; or (b) where the maximum amount of fine which may be imposed for such offence does not exceed five lakh rupees, by the Regional Director or any officer authorised by the Central Government, (italics supplied) on payment or credit, by the company or, as the case may be, the officer, to the Central Government of such sum as that Tribunal or the Regional Director or any officer authorised by the Central Government, as the case may be, may specify: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to whom the offence is so compounded shall be discharged. (4) The Tribunal or the Regional Director or any officer authorised by the Central Government, 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 requires a company or its officer to file or register with, or deliver or send to, the Registrar any return, account or other document, may direct, by an order, if it or he thinks fit to do so, any officer or other employee of the company to file or register with, or on payment of the fee, and the additional fee, required to be paid under section 403, such return, account or other document within such time as may be specified in the order. (5) Any officer or other employee of the company who fails to comply with any order made by the Tribunal or the Regional Director or any officer authorised by the Central Government under sub-section (4) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding one lakh rupees, or with both. (6) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974),- (a) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the applicant is required to be made only with the Registrar meaning Registrar of Companies concerned, in view of the general scheme of the provisions of the Act whereunder, both the regulatory authority in relation to overseeing and enforcing compliance as prescribed under the different provisions of the Act, as well as the prosecuting authority pre-dominantly in issuing show cause notice in relation to non-compliance with the regulatory framework envisaged under the Act and subsequently, if necessary, in initiating prosecution before the appropriate criminal court concerned, is also vested with the Office of the Registrar of Companies. Thus, in view of the unique position of the Registrar, the section mandates the Registrar to forward the application along with its comments to the compounding authority. The basis on which the Registrar is required to forward the application either to the Tribunal or to the Regional Director is dependent on the maximum quantum of fine prescribed under the Act in order for the compounding authority to entertain an application. It is also relevant to note that being the prosecuting authority, the Registrar in relation to the offence committed u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... officer within a period of three years from the date on which a similar offence committed by it or him was compounded, then such an application for compounding under sub-section (1) of section 441 shall not apply. Again, by virtue of the 3rd proviso to sub-section (1) of section 441 where any investigation has been initiated or pending under the Act against the company or its officer, a fetter has been placed on the power of compounding by the Tribunal or Regional Director as the case may be. In addition, by virtue of clause (b) of sub-section (6) of section 441 where any offence which is punishable under the Act with imprisonment only or with imprisonment and also with fine, the said offences shall not be compoundable by the Tribunal or the Regional Director, Further, by virtue of clause (b) of sub-section (6) of section 441 where any offence which is punishable under the Act with imprisonment or fine, or with imprisonment or fine or with both, the said offence shall be compoundable only with the permission of the Special Court. While construing the said provision, however the Hon ble NCLAT in the matter of Cinepolis India (P.) Ltd. v. Registrar of Companies, NCT of Delhi and Hary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerned sections be it the defaulting company, or in relation to the defaulting individuals named therein, whether it be the Managing Director, directors, officers or other professionals who have been charged with the onus of compliance but has defaulted as evidenced from the following table, namely Table I made for an easy comprehension and as culled out from the Act as applicable presently:-- TABLE 1-WHERE MAXIMUM FINE PRESCRIBED FOR THE OFFENCE COMMITTED UNDER THE RELEVANT SECTION IS IN EXCESS OF ₹ 5,00,000/ - SECTION NATURE OF OFFENCE MINIMUM FINE MAXIMUM FINE REMARKS 8(11) Default in complying with the requirements relating to formation of companies with charitable objects etc. 1000000 1 Crore Officer who is in default shall be punishable with imprisonment which, may extend to three years or with fine which shall not be less than twenty-five thousand rupees but may extend to twenty-five lakh rupees, or with both. 40(5) Default in complying with the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... end to six months or with fine which shall not be less than five lakh rupees but which may extend to twenty-five lakh rupees, or with both. 187(4) Contravention of the provisions of this section relating to investment of company held in its name. 25000 2500000 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 twenty-five thousand rupees but may extend to one lakh rupees, or with both. 195(2) Prohibition on insider trading of securities. 500000 25 crore Only person contravening is liable under this provision. (Imprisonment which may extend to five years or with fine between 5 lakh to 25 crore or three times the amount of profits made out of insider trading, whichever is higher, or both. 221(2) Any removal, transfer or disposal of funds, assets, or properties of the company in contravention of the order of the Tribunal under sub-section (1) 100000 2500000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndependent 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 compounding the offence has the discretionary power to fix the quantum of compounding fees based on the facts and circumstances of the case and of course as per the law laid down while construing section 441(6) in Cinepolis India (P.) Ltd. case cited (supra) with respect to permission of Special Court as to when it may be required. It is also pertinent to further note that none of the above sections listed in Table I contemplates a situation of continuing default warranting imposition of fine per day. Thus, in relation to fine in excess of five lakh rupees prescribed under the relevant provisions of the Act and the compounding authority who can compound such offences as per section 441(1) is this Tribunal and the Regional Director does not have any jurisdiction in the matter is quite evident. Moving on from Table I, in relation to other sections of the Act where penalty has been prescribed either in the form of a fixed fine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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. 53(3)- Violation of provisions relating to issue of shares at discount 100000 500000 In Case of Officer: Shall be punishable with imprisonment 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. 56(6)- Failure to comply with the provision relating transfer and transmission of securities under sub-section (1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 -- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 147(1)- Failure of company to comply with provisions of sections 139 to 146 with regard to auditors 25000 500000 In case of officer: Shall be punishable with imprisonment for a term which may extend to one year or with fine which shall not be less than ten thousand rupees but which may extend to one lakh rupees. or with both. 149 Constitution of board 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. 160 failures to inform members of the candidature of a person for the offence of director 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. 162 Director appointed by enbloc resolution 50000 500000 Punishment as per section 172. wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company: Punishable with Fine which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupees. 189 Failure to maintain register of contract -- 25000 Only director is liable under this section. 191(5) Contravention of the provisions of this section relating to payment to director for loss of office in connection with transfer of property 25000 100000 Only director is liable under this section: Director shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees. 194(2) Prohibition on forward dealings in securities of company by director or key managerial personnel. 100000 500000 Only director or any key managerial personnel: Shall be punishable with imprisonment which may extend to five years or with fine which shall not be less than five lakh rupees but which may extend to twenty-five crore rupees or three times the amount of profits mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company. Company Liquidator and any receiver or manager in default shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to three lakh rupees. 347(4) Disposal of books and papers of company. -- 50000 The liability is only on: Person responsible under this section for contravention of any rule under sub-section (3) punishable with imprisonment for a term which may extend to six months or with fine which may extend to fifty thousand rupees, or with both. 348(7) Information as to pending liquidations. -- 100000 The liability is only on: The Company Liquidator shall be punishable with imprisonment for a term which may extend to six months or with fine which may extend to one lakh rupees, or with both. 405(4)- Failure to furnish information or statistics etc. by the companies required by the Central Government -- 25000 In case of Officer: Every officer in default, shall be punishable with im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king 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 the maximum amount of fine i.e. in each case where the fine amount prescribed is based on a continuing default basis as reflected in Table III(a) where there is a maximum cap to the fine that can be imposed even in the case of continuing default and whereas Table III(b) hereunder does not contain any such restriction:-- TABLE III(a) - COMPOUNDING OF OFFENCE - CONTINUING DEFAULT: WHERE MAXIMUM FINE IS FIXED SECTION NATURE OF OFFENCE MINIMUM FINE MAXIMUM FINE REMARKS 12(8) Non-Compliance with the requirements of section 12 in regard to registered office. 1000 for every day 100000 The company and every officer in default shall be liable to a penalty of 1000 rupees for every day during which the default conti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 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 ₹ 10,00,000/- all the other provisions contain a fine by way of maximum at or below ₹ 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 approval of the Cent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es for every day after the first during which the contravention continues. (This fine is as per sec 450) 52(1) (2) Failure to comply with application of securities premium account or utilisation of securities premium account for purpose other than those specified in sub sec (2) -- 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) 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 furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich the failure continues. 89(5) Failure to file declaration not holding beneficial interest in any share by any person. -- 50,000 (further extendable to 1000 per day in case of continuing) This fine is not applicable to company. Any person in default shall be punishable with fine which may extend to fifty thousand rupees and where the failure 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. 89(7) Failure to file return relating to beneficial interest in any share before the expiry of the time specified u/s. 403(1)(i) proviso. 500 1000 (further extendable to 1000 per day in case of continuing) The company and every officer in default shall be punishable with fine which shall not be less than five hundred rupees but which may extend to one thousand rupees and where the failure 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000 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) 123 Payment or declaration of dividend otherwise than out of profit. -- 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) 159 Punishment for contravention of any provision of section 152, section 155 and section 156 by any individual or director of a company. -- 50000 (further extendable to 500 per day in case of continuing) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 224 Failure to provide assistance to CG in connection with the prosecution launched against a person on the basis of inspector s report. -- 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) 302(4) Default by official liquidator in forwarding a copy of the order of dissolution of company by tribunal within the period specified in sub-section (3) -- 5000 for every day This fine is applicable only on official Liquidator. Fine may extend to five thousand rupees for every day during which the default continues. 348(6) Contravention of the provisions of information as to pending liquidation -- 5000 for every day This fine is ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... five hundred rupees for every day after the first during which such contravention continues. Since even in relation to continuing defaults while certain sections fix a maximum amount of fine as can be seen from Table III(a) as above, while in relation to offences as given under Table III (b) there is no such maximum quantum of fine fixed and the computation of fine solely depends on the variable, whether it may be days or otherwise which is to be the multiplying factor in order to arrive at the quantum of maximum amount of fine within which the compounding authority is required to levy the compounding fee and the product arising therefrom also determining the authority to whom the application for compounding is required to be forwarded. However, prior to proceeding to ascertain as to how the threshold limit of five lakh rupees is to be computed to enable the Registrar to forward to the appropriate compounding authority, a brief throwback into the legislative enactment under the Companies Act as well as judicial pronouncements in relation to the aspect of penalty, consisting of fine and imprisonment in relation to corporate entities as passed by the Hon ble Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... marcation 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 case of a juristic person, namely the defaulting company and was ultimately settled by the Hon ble Supreme Court in relation to Foreign Exchange Regulation Act (FERA), 1973 but however the ratio being applicable to all the other laws as well, which contained similar provisions including erstwhile Companies Act, 1956 and in the matter of Standard Chartered Bank v. Directorate of Enforcement [2005] 60 SCL 217 (SC) being that of a 5 judge Bench and the judgement for the majority of three rendered by Hon ble Justice K.G. Balakrishnan as he then was, and the relevant paragraphs which is of significant importance to the case on hand is reproduced hereunder as follows:-- There is no dispute that a company is liable to be prosecuted and punished for criminal offences. Although there are earlier authorities to the effect that corporations cannot commit a crime, the generally accepted modern rule is that except for such crimes as a corporation is held incapable of committing by reason of the fact that they involve personal malicio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 mandatory imprisonment. The corporate bodies, such as a firm or company undertake series of activities that affect the life, liberty and property of the citizens. Large scale financial irregularities are done by various corporations. The corporate vehicle now occupies such a large portion of the industrial, commercial and sociological sectors that amenability of the corporation to a criminal law is essential to have a peaceful society with stable economy. 15. The paragraphs above clearly demonstrate that invariably in all cases, the defaulting company should suffer the consequences of default without any remission. The Expert Committee of Company Law headed by Dr. Jamshed J. Irani constituted to advise the Government on the new company law and set up by the Ministry of Corporate Affairs vide order dated 2nd December, 2004 submitted its report on 31.05,2005 wherein taking note of the above judgment observed at paragraph 6 of the Report as follows:- 6. The Committee is of the view that in tune with legal dev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 pendency of these cases and suggesting ways and means of expeditious disposal of these cases. The group headed by Mr O.P. Vaish submitted its report to the Government took note of the Dr. J.J. Irani Committee Report recommending in house mechanism for the levy of penalties for defaults and under the head Executive Summary observed that it is of the view that the cases where no worthwhile public interest is involved should be either withdrawn or allowed to be liberally compounded and also under Chapter I had observed that depending upon the quantum of penalty attracted by an offence, the compounding may either be done by the Regional Director or by the Company Law Board (CLB). Subsequent to Companies Act, 2013 being brought into force, the Ministry of Corporate Affairs constituted the Companies Law Committee (CLC) under the chairmanship of the Secretary, Ministry of Corporate Affairs vide an office order dated 04th June 2015 with the mandate, inter alia, of making recommendations on issues ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 high and it is being dealt with separately. Further, in most of the cases, the sections deal with rights of shareholders like maintenance of registered office, maintenance of register of members, etc. In view of this, the Committee felt that It would not be prudent to reduce the prescribed penalties for the adjudicating authority, who is not given any discretion on the quantum of penalty to ROC. Further, the Committee also felt the role of appellate body under section 454 would need to be clearly brought out as the appellate body may not be able to levy a lesser penalty than that was levied by adjudicating authority (i.e. ROC). 28.10 At the same time, the Committee noted with concern the dip in annual statutory filings as compared to last year, indicating laxity owing to the additional time and the low filing fees, which need to be addressed. As the hands of the Registrar are tied with regard to filing of prosecution before the prescribed 270 days during which filing can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udgement 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 which can be imposed in case of default upon the corporate entity which is separate and distinct from the penalty, whether it be fine or imprisonment, the wrath of which is incurred by individuals in case of default in addition to the corporate entity; (c) Based on such minimum and maximum fine so prescribed on the corporates, the Legislature under section 441 of the 2013 Act has prescribed the Compounding Authority to which an application is required to be forwarded by the Registrar upon its receipt from the Applicants who seek to compound the offences, [even though the CLC report of 2016 curiously mentions only the Tribunal); (d) In order to ensure a high rate of compliance in relation to statutory annual filings a differentiated treatment with a higher liability is provided under section 451 of the Companies Act, 2013 (e) Offences of technical nature to be dealt with in-house structure, namely the Registrar of Companies and the concerned Regional Dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 this regard, it is also to be seen that it is not necessary for all the defaulters in relation to an offence to go for compounding. While some may opt for compounding, the others may opt to face prosecution and trial. Further, the timing to approach for compounding may also vary with some defaulters opting to go for compounding even prior to launch of prosecution while others in relation to the said offence may go for composition subsequent to the launch of prosecution and for that matter may also approach for composition even at the time of trial or even at the time when the matter is reserved for orders. Thus, for the purpose of ascertaining as to which of the appropriate compounding authority it should be forwarded, whether it should be maximum amount of fine as prescribed for the defaulting company or on the basis of aggregate fine of both the defaulting company and the officer in default, it should be only the maximum fine as prescribed fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt 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 whether in computing such maximum fine for an offence for the limited purpose ofixing the compounding authority, the aggregate of defaulting company as well as its officer-in-default should be taken or only that of defaulting company, with a view to give effect to the intention of the Legislature as can be gathered from the departure of the earlier regime under Companies Act, 1956 which did not have such clear and distinct demarcation of fines leviable in relation to the defaulting company vis-a-vis officers-in-default it will be appropriate that the maximum fine prescribed for the defaulting company for the offence should be taken by the Registrar while forwarding an Application for Compounding for either of the Compounding Authority and not on the basis of aggregate or otherwise of the fines. Thus, construing for the purpose of giving effect to the words where the maximum amount of fine which may be imposed for such offence does not exce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esultant 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 company in relation to a particular offence pertaining to continuous default, however, the officers-in default are made punishable with fine and in such circumstances where the fine exceeds five lakh rupees in the case of every officer-in-default such application for composition shall be forwarded to this Tribunal and if does not exceed the threshold limit of maximum fine of five lakh rupees, then in the said case to the Regional Director. At this juncture it will be apposite to cite the decision of Hon ble Principal Bench, NCLT, New Delhi rendered in C.P.No.l25(ND) 2016 in the matter of Skipper Seil Ltd., In re on 31.08.2016 wherein the Hon ble Principal Bench was pleased to dismiss a compounding petition on the ground that the said petition, interalia, was not maintainable in view of maximum amount of fine prescribed did not exceed five lakh rupees and the recourse of remedy lies with a different forum which only reinforces the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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 years for which default had been committed, out of four individuals one was not involved in relation to a default of one year. In the circumstances what can be the common cause of action for all the applicants in relation to two years of default for which a common application for compounding has been filed. Thus, unless an application is filed seeking for exemption for maintaining a joint application before this Tribunal and if the Tribunal is satisfied, taking into consideration that such a joint application is maintainable, a joint application by all the defaulters is not maintainable, which seems to be the position in all the above listed applications where the applicants seems to be more than one, even though one or more of them may not have been part of the default committed or for that matter, part of the defaulting company at the time of default/offence, if at all when it is said to have arisen. However i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sand 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-filing of annual returns, then by virtue of provisions of section 451 of the 2013 Act, the said offence becomes non-compoundable as the defaulters will be not only required to pay twice the amount of fine but also the defaulting officers will be required to undergo in addition to fine, imprisonment as provided for under section 92 of the 2013 Act. Similar is the case with non -compliance with the provisions of section 137 of the 2013 Act in relation to non-filing of financial statements with the Registrar of Companies within the prescribed period. Thus section 441(2) of 2013 Act read together with section 451 as given above, under the circumstances detailed in section 451 virtually makes the offences punishable with fine or imprisonment an offence punishable with fine and imprisonment for repeated defaults committed within three years and makes it under the circumstances non-compoundable by this Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder 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 company and its officers be allowed to convene the Annual General Meeting for the first three years and go for compounding as provided for under section 441(2) for the next three-year cycle or for more number of years. Construing the same according to the contentions of the applicants will lead to absolute chaos in corporate administration as well as in corporate governance, as well as in relation to company administration by the regulatory authorities and is thus required to be strongly discouraged. These sort of selective amnesia on the part of the companies in convening its AGM or in filing the statutory returns, as recent experiences show has virtually resulted in en masse striking off nearly 200,000 lakh companies from the Register of Companies maintained by the Registrar and has subsequently resulted virtually in a docket explosion leading to further litigations which is also not conducive taki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 Act since the fine computed exceeds ₹ 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 of a harmonious construction as sought to be explained by the Regional Director and the Central Government is clearly not the case more so when a joint application filed allows the defaulting company and its officers to conveniently side step the provisions of section 441(2) despite being repeated defaulters and in any case by virtue of applicability of section 451 of the 2013 Act where the offence if visited with fine or in the alternative imprisonment or with both thereby becoming virtually non-compoundable by this Tribunal or for that matter the Regional Director as well. To sum up and to consider the twenty three applications in light of the aforementioned detailed examination of the penal sections and also read with section 451 of the 2013 Act as well as section 441 of the 2013 Act relating to compounding and to have an over view as to how the applications for compou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ND/2017 220 (1956 Act) and 137 (2013 Act) 1 9 4 13 CP-16/124/ND/2017 159 (1956 Act) and 92 (2013 Act) 1 8 4 14 CP-16/122/ND/2017 166 (1956 Act) and 96 (2013 Act) 1 8 4 15 CP-16/125/ND/2017 166 (1956 Act) and 96 (2013 Act) 1 9 4 16 CP-16/123/ND/2017 220 (1956 Act) and 137 (2013 Act) 1 8 4 17 CP-16/126/ND/2017 159 (1956 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (ii) In relation to CP-16/174/ND/2017, CP-16/180/ND/2017, CP-16/127/ND/2017. CP-16/123/ND/2017, CP-16/141/ND/2017, CP-16/132/ND/2017 and CP-16/144/ND/2017 the defaulted provisions being section 137 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 seven applications as listed above pertains to default in relation to filing of Financial Statements 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 137 provides for fine or imprisonment or with both, for the officers in default thereby making it virtually non-compoundable by virtue of operation of section 451 read with section 441(6) of the Companies Act, 2013 this Tribunal does not have jurisdiction to compound the offence as dealt with in detail under Issue No.3 supra. (b) Further a joint application for the default committed under the 1956 Act as well as 2013 Act filed is also not main ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 read with section 99 of the Companies Act, 2013 and being in relation to non-convening of Annual General Meeting of shareholders for a year and since the Registrar of Companies has not forwarded any specific report, the Registry of this Tribunal is directed to return the files to the Registrar of Companies for duly forwarding the report and in case it is reported that there has been no default on the part of the applicants the Registrar shall state so and forward the report along with application to the Regional Director for suitably considering and closing the application for compounding as filed by the applicants. (vi) In relation to CP-16/179/ND/2017, the defaulted provisions being section 129 of the Companies Act, 2013 or the equivalent provision under the earlier Act of 1956 since repealed as the case may be, 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 extracted as Annexure - 6 to this order, thereby falling within the compounding juri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant years as reflected against 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 supra cannot be entertained and hence dismissed. (ix) In relation to CP-16/121/ND/2017, the defaulted provisions being section 217(l)(e) and section 217(4) of the Companies Act, 1956 since repealed, 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 or for that matter ₹ 50,000/- under the earlier Act of 1956 as can be seen from the computation of the Registrar of Companies in its report forwarded to this Tribunal and as extracted as Annexure - 8 to this order, thereby falling within the compounding jurisdiction of the Regional Director, the Registry of this Tribunal is directed to return the files in CP-16/121/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-16/121/ND/2017 in light of ..... 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