TMI Blog2019 (5) TMI 1076X X X X Extracts X X X X X X X X Extracts X X X X ..... mpounding the offences for which prosecution has been laid. If one looks at the question of law raised, in the settled legal principles, it is really not a substantial question of law as what all has been questioned is the wisdom of the CLB in exercising discretion by accepting the compounding applications. The penalty imposed for compounding is substantially high which would serve as a deterrent in future to the respondent and also similarly-situated entities / persons. Since there is no merit in the Appeal and the decision of the CLB having been based on the material placed before it, and that no question of perversity of finding of fact having been raised. Appeal does not warrant interference at the hands of this Court and the same is liable to be dismissed. - COMPANY APPEAL No. 1 OF 2017 - - - Dated:- 26-12-2018 - MR CHALLA KODANDA RAM, J. For The Appellant : Sri Namavarapu Rajeshwar Rao For The Respondent : Sri N. Naveen Kumar JUDGMENT : This Company Appeal is filed invoking Section 10(F) of the Companies Act, 1956 (for short, 'the Act') (now repealed), by the respondent - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... If facts of the case clearly show the existence of violation / contravention of provisions of law mala fidely and deliberately by the respondent and the same are serious in nature, whether the discretionary power under Section 621-A of the Companies Act, 1956 should be exercised and the respondent be released merely by paying the penalty charges without attracting stigma of conviction Learned counsel for the appellant Sri Namavarapu Rajeshwar Rao submits that the respondent company had failed to obtain prior approval of the Central Government while entering into contract with M/s Maytas Property Private Limited, M/s Maytas Hill County Developers Private Limited, M/s Hill County SEZ Private Limited, thereby contravening the provisions of Section 297 of the Act, for which prosecution was launched before the Economic Offences Court and the same is pending. According to him, the violations committed by the respondent are of serious nature affecting public interest and the CLB gravely erred in allowing compounding of offences in a casual manner. The learned counsel, while copiously taking this Court th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CLB has taken into consideration the subsequent developments, particularly taking over of the management of erstwhile M/s Maytas Infra Limited by the respondent company and the proceedings of the CLB in M/s Satyam Computers Limited case. In that view of the matter, the learned Senior Counsel would urge that the contention of the appellant that the CLB had failed to apply its mind and appreciate both fact and law is not sustainable, hence, he prays for dismissal of the Appeal as the respondent had already paid the compounding penalty, as directed by the CLB. Perused the material on record. In view of the rival contentions, the question for consideration is 'whether the Appeal raises a substantial question of law as set out in para 7, and whether the discretion exercised by the CLB while ordering compounding of offences calls for interference by this Court'. The CLB, in its order dated 10.03.2016, had taken note of the fact that the management of M/s Maytas Infra Limited was taken over pursuant to the orders of the CLB, Principal Bench, New Delhi, dated 31.08.2009 in Company Application No. 431 of 2009 in Company Petition No. 3 of 2009 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, Section 320 of the Code provides basically two categories of offences compoundable; one category requires leave of the Court and the other requires no leave of the Court. In all the categories of cases, compounding can take place at the instance of the persons mentioned in the 3rd column of the Table attached to Section 320 of the Code. The Court also held that while considering a compounding application, in the absence of special procedure relating to compounding, the procedure and principles relating to compounding under Section 320 of the Code shall automatically apply, in view of sub-section (2) of Section 4 of the Code. Applying the above laid guidelines to the present case on hand, there is no dispute that the offence alleged against the respondent company and its directors for violation of the provisions of Section 297 of the 1956 Act is compoundable in terms of Section 621A of the said Act. The offences for which prosecution is launched against the respondent squarely fall under sub-section (2) of Section 4 of the Code which reads as under: Sub-section (2) of Section 4 of the Code is set out below: 4(2) All offences under any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... compounded, shall be deemed to be a first offence. ( 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 Central Government. ( 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 any person authorised by the Central Government against the offender in relation to whom the offence is so compounded. ( d) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... restriction, the CLB is entitled to consider facts in each case and, taking into consideration the nature of violation found, consequent damage that may be caused to the public interest at large, and the relative merits of allowing the criminal proceedings to proceed, is empowered to take decision in a given case whether to compound or not. There appears to be no judgment of the Supreme Court or any of the High Courts exactly delineating the parameters that could be followed in considering the compounding of cases under various jurisdictions. However, in the context of the offences alleged under the SEBI Act, SEBI had notified certain guidelines. In recent times, the NCLAT chaired by Hon'ble Sri Justice Sudhansu Jyoti Mukhopadhaya, retired Supreme Court Judge in Company Appeal (AT) No. 49, 50, 51, 52 and 53 of 2016 (M/s Viavi Solutions India Private Limited v. Registrar of Companies, NCT Delhi and Haryana), in para 12, had broadly set out the parameters that are required to be noticed in compounding the offences which can be usefully extracted as under: 12. Depending on nature of offence and its gravity and if it is pleaded b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Code of Criminal Procedure any offence punishable under the SEBI Act not being an offence punishable with imprisonment only or with imprisonment or also with fine may either before or after the institution of any proceedings be compounded by Securities Appellate Tribunal or Court before which such proceedings are pending. The interpretation of the said provision would not mean that whenever an application is preferred by the accused such offences have to be compounded or that the prosecution agency cannot oppose such an application. It would also not mean that the prosecuting agency viz. SEBI can be compelled to concede for allowing compounding application. Whether a dispute should be resolved or whether the wider public interest in ensuring regulatory compliance requires that proceedings should be initiated and if initiated should be followed to that logical conclusion is the matter falls within the discretion of SEBI or a person who apprehends that action will be initiated by SEBI has no vested right to insist that the dispute be resolved in terms of consensual settlement. Furthermore, merely on the ground that the embargo laid down under Section 320 of Code o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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