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TMI Blog2018 (11) TMI 195X X X X Extracts X X X X X X X X Extracts X X X X ..... al Govt. Counsel JUDGMENT SUDHANSU JYOTI MUKHOPADHAYA, J. In these appeals as common question of law is involved, they were heard together and disposed of by this common judgment. 2. The Appellants, Companies along with its Officers, filed applications under Section 441 of the Companies Act, 2013 for compounding of the offence(s) committed by them, on the ground that corrective measures have already been taken, which have been dismissed/disposed of by the National Company Law Tribunal (hereinafter referred to as "Tribunal"), New Delhi Bench-III, by common order dated 16th February, 2018 with the following observations. "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being Section 92 of the Companies Act, 2013 and/or the equivalent provision under the earlier Act of 1956 since repealed as the case may be cannot be entertained in view of the following: - (a) Since all the five applications as listed above pertains to default in relation to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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For each of the reasons as stated above 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 stands 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96 read with Section 99 of Companies Act, 2013 or the equivalent provisions under the earlier Act of 1956, since repealed and the maximum fine amount provided in Section 99 being Rs. 100,000/- in addition to fine which may extend to Rs. 5000/- for each day of default during which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 rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17 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(1)(b) 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, 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(1)(b) of the 2013 Act and the Regional Director shall dispose of the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls are: i. Whether the Companies Act, 2013 bars filing of a joint application for compounding of offence by a defaulting company along with its Officers in default? ii. Whether the Companies Act, 2013 bars filing of a joint application for compounding of the same offence committed in different years? iii. Whether an offence punishable under the relevant provisions of the Companies Act, 2013 with 'imprisonment or fine', if repeated within a period of three years results into a mandatory imprisonment for the defaulters and whether the same can be compounded or not? iv. Whether an offence punishable under the relevant provisions of the Companies Act, 2013 with 'only fine', if repeated within a period of three years results into a mandatory imprisonment for the defaulters and whether the same cannot be compounded? v. Whether the Tribunal has jurisdiction to compound offences where the fine prescribed for such offence does not exceed Rs. 5,00,000/- 4. According to the learned counsel for the Appellants, there is no bar in preferring a composite application for compounding the same offence committed by defaulting Company along with its Officers in default. There is no bar to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommitted 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 authorised by the Central Government, 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 the Registrar within seven days from the date on which the offence is so compounded. (c) Where any offence is compounded before the institution of any prosecution, no prosecution shall be instituted in relation to such offence, either by the Registrar or by any shareholder of the company or by any person authorised by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be compounded by the Tribunal, and where the maximum amount of fine does not exceed five lakh rupees, can be compounded by the 'Tribunal' as also by 'the Regional Director' or 'any officer authorised by the Central Government'. 10. Clause (a) and clause (b) of sub-section (1) read with sub-sections (2), (3) & (4) of Section 441 makes it clear that both 'the Tribunal' and 'the Regional Director' or 'any Officer authorised by the Central Government' is empowered to compound the offence which does not exceed five lakh rupees and if the offence is committed by the Company or any Officer thereof with 'fine only'. 11. The aforesaid provision makes it clear that Section 441 only puts a restriction on the power of the 'Regional Director' and 'the authorised Officers of the Central Government' permitting them to compound the offences wherein the maximum amount of fine does not exceed five lakh rupees and is punishable with 'fine only'. No such fetter has been put on powers of the Tribunal, which is the main forum for such compounding of offences, the other forum of 'Regional Director' and 'Officer of the Central Government' being alternative but restricted by extent of quantum of punishme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aling with the application under Section 441 of the Companies Act, 2013 or any other petition under the said provision. 15. Further, in absence of any specific bar of 'joinder of parties' or joinder of separate cause of actions in preferring a compounding application, we hold that joinder of parties for same offence is permitted. Since facts leading to any non-compliance under the Act on the part of a company and its Officers in default will be same, any suggestion to the contrary will only lead to multiplication of proceedings and different findings, which is not desirable. 16. The provision for compounding offences vested with the Tribunal, the Regional Director and the Officer authorised by the Central Government was earlier vested under earlier Section 621A of the Companies Act, 1956. Explaining its position, the Central Government from its Ministry of Corporate Affairs by letter dated 28th April, 1993 informed that there is no bar under the Companies Act, 1956 for filing joint compounding applications under Section 621A. After enactment of Section 441 of the Companies Act, 2013, the Central Government from its Ministry of Corporate Affairs reiterated its position by letter d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal provision of the Act. 22. For proper understanding of Section 451, it is desirable to notice punishment in cases of repeated defaults, as prescribed under the Companies Act, 2013. 23. Section 88 deals with 'Register of members' for which every company is required to keep and maintain, as shown therein. Sub-section (5) of Section 88 therein is penal provision for not maintaining a register of members or debenture-holders or other security holders, which is as follows: "88. Register of members, etc.-(1) Every company shall keep and maintain the following registers in such form and in such manner as may be prescribed, namely:- (a) register of members indicating separately for each class of equity and preference shares held by each member residing in or outside India; (b) register of debenture-holders; and (c) register of any other security holders. xxx xxx &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determine that the same offence is committed for the second or subsequent occasions. 27. From sub-section (5) of Section 88, it is clear that the Company and every officer where the failure is a continuing one, the punishment provided thereunder will be that of 'a further fine which may extend to one thousand rupees for every day, after the first during which the failure continues', addition to punishment of fine which shall not be less than fifty thousand rupees but which may extend to three lakh rupees. Where the failure is continuing one, additional fine having imposed in addition to fine prescribed under sub-section (5) of Section 88, as the period may be more than one or more financial years, Section 451 cannot be made applicable on the ground that the same offence is committed for the second or subsequent occasions within a period of three years. 28. In order to interpret Section 451 and the words used in it "where the same offence is committed for the second or subsequent occasions within a period of three years" aid can be taken from Explanation of sub-section (2) of Section 441 where with regard to that Section, it is provided that "any second or subsequent offence commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ished of imprisonment or fine or both. 32. Therefore, we hold that the Tribunal is wrong in holding that if Section 451 is read along with Section 441(6) for offence punishable with 'fine or imprisonment' or 'only with fine' or 'fine and imprisonment' on repeated defaults committed within three years, the Tribunal does not have jurisdiction to compound the offence. 33. A bare perusal of the provision makes it evident that Section 451 only provides that 'fine' in case of any repeated defaults shall be 'twice the amount of fine', in addition or in alternative to any imprisonment for such default if prescribed under the relevant provisions of Act, 2013. It does not make the imprisonment mandatory. 34. Secondly, use of word 'any' in Section 451 in the phrase 'in addition to any imprisonment for that offence' leaves discretion with the prosecuting authority/court to punish the defaulter with imprisonment. Had the intention of the legislature been to make the imprisonment mandatory, it would not have used the word 'any'. 35. If the interpretation adopted by the Tribunal is accepted then it will amount to substituting words in a penal provision, which is impermissible in the law. 36. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l return under sub-section (4), before the expiry of the period specified under Section 403 with additional fee, the company shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to five lakhs rupees and 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." B. Punishment provided for a group of Sections. Section 99-Punishment for default in complying with provisions of Sections 96 to 98: "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 the case of a continuing default, with a further fine which may extend to five thousand rupees for every day during which such default continues." C. Punishment in case of repeated default "Section 451. Punishment in case of repeated default- If a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous sections in the Companies Act, 2013 will as such apply to offence committed for the first time only. Similarly, the existing provisions of Section 441 dealing with compounding of offence will also be materially impacted as to the extent of its reading it in the light of Section 451 of the Act. 3. Learned Tribunal below has also looked into the background material on the basis of which Section 451 has been introduced in the Act. It has also noted that in spite of two Amendments made in the Act of 2013, Section 451 as originally passed has been retained by the Legislature in its wisdom which clearly discloses the intention of Legislature to be unforgiving in relation to repeated defaults. Further seeing the repeated defaults committed by the company or its Officers and there being no such provision of punishment in old Act of 1956, therefore, the Legislature thought it fit to insert Section 451 in Act and retained it till today. I can understand this provision that to "Err is Human" but repetition of the "Error is not Human". A person learns from his mistake and he does not continue to make mistake after mistake. This provision will stare at a person who has not learnt a lesson ..... X X X X Extracts X X X X X X X X Extracts X X X X
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