TMI Blog2018 (11) TMI 195X X X X Extracts X X X X X X X X Extracts X X X X ..... nd or subsequent occasions within a period of three years, the officer is liable to be imprisoned. If such interpretation is given, then it will amount to taking away the power of the Competent Court (Special Court) to decide whether in the fact and circumstances of the case and on the basis of gravity of offence, the officer will be liable for punished of imprisonment or fine or both. 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. 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. Secondly, use of word ‘any’ in Section 451 in the phrase ‘in addition to any imprisonment for that offence’ leaves discretion with the prosecuting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs, 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being Section 92 of the Companies Act, 2013 and/or the equivalent provision under the earlier Act of 1956 since repealed as the case may be cannot be entertained in view of the following: - (a) Since all the five applications as listed above pertains to default in relation to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 same offence had been committed for the second or subsequent occasions within a period of three years and as the defaulted section being section 92 provides for fine or imprisonment or With both, for the Officers in default ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut 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 ₹ 100,000/- in addition to fine which may extend to ₹ 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 relevant years as reflected against each of 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 cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 company petition CP-16/177/ND/2017 in light of this order and in accordance with its merit. (viii) In relation to CP-16/175/ND/2017, the defaulted provisions being Section 173 Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 ₹ 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 prefer such composite appeal if default is committed in successive financial years. 5. It was further submitted that the interpretation of Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is 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 the Central Government against the offender in relation to whom the offence is so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt 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 punishment. The Tribunal has the powers to compound all the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 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 dated 31st January, 2018 that there is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision 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 xxx (5) If a company does not maintain a register of members or debenture-holders or other security holders or fails to maintain them in accordance with the provisions of sub-section (1) or sub-section (2), the company and every o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very 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 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 . (Emphasis supplied) It is apparent that unless previously the offence has been compounded , the rigour of higher punishment as contemplated under Section 451 would not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal 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. On the contrary, the settled law is that the penal provisions have to be construed literally, as held by the Hon ble Supreme Court in Abhiram Singh v. CD Commachen (2017) 2 SCC 629 , wherein the Apex Court held: 39. We see no reason to take a different view. Ordinarily, if a statute is well dr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 company or an officer of a company commits an offence punishable either with fine or with imprisonment and where the same offence is committed for the second or subsequent occasion within a period of three years, then, that company and every of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 even after committing offence at least not to repeat at least within a short span of three years. 4. In Section 451 of the Act, in first part it is stated that if a company or an officer of a company commits an offence punis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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