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TMI Blog2022 (8) TMI 883X X X X Extracts X X X X X X X X Extracts X X X X ..... 266G of the Companies Act, 1956 ("the Act" for short) and held that the compounding of offence under Section 266C was without prejudice to the case pending before the I Addl. Chief Metropolitan Magistrate, Bangalore under Sections 177, 420 and 416 of IPC. 3. The appellant is referred as SFIO and the respondent is referred as the Company for the sake of convenience. 4. Brief facts of the case are as under: The Company was engaged in the business of developing real estate projects at various places and had collected large amount towards booking in respect of "Vajragiri" real estate project. It appears that the said project did not materialize and a large number of investors' money was not refunded and as such, the investors filed complaints against the company pointing towards the financial affairs of the company being conducted prejudicial to the interest of various stakeholders. In the backdrop of this, investigation was ordered and a report was submitted by the Registrar of Companies, Bangalore. The Registrar of Companies, Bangalore under Section 243(6) of the Act scrutinized the balance sheet of the company and on scrutiny, found that there is violation of Sections 295 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and that seeking for three DINs was due to inadvertence and not intentional and also stated that the company is using only one DIN and has sought to cancel the other two DINs and that the same was not misused at any point of time. 6. The SFIO filed objections to the compounding application, inter alia, contending that the charges leveled against the company are serious in nature and this Court directed a joint trial of both the complaints bearing No.28/2012 for violation under Section 266G of the Act and the complaint bearing CC.No.6906/2012 before the I Addl. Chief Metropolitan Magistrate, Bangalore, for the offences punishable under Sections 177, 416, 419 and 420 of the IPC in Crl.P.No.3393/2012 and thus, stated that the offence punishable under Section 266G of the Act could not be considered in isolation for compounding of offences, more particularly when such violation is willful and warranted prosecution for non-compoundable offences under the IPC. 7. The Board on hearing and considering the material on record and the objections to the application filed by the SFIO exercising its discretionary powers as envisaged under Section 621A of the Act, compounded the offences by spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Whether the compounding of the offence by the Board under Section 266C read with Section 621A is justified without seeking prior permission from the Court ? 13. With regard to point No.(i), the company does not dispute that they had applied for three DINs, but specifically contends that obtaining of DIN was by using different IDs and address and was obtained due to inadvertence and not intentional and contended that the company was only using one DIN. To consider whether order of the Board is justifiable, relevant provisions needs to be considered. Section 266C of the Act states the prohibition to obtain more than one DIN by any individual, the said Section reads as under: "266C. Prohibition to obtain more than one Director Identification Number.- No individual, who had already been allotted a Director Identification Number under Section 266B, shall apply, obtain or possess another Director Identification Number." The penalty for contravention of provision of Section 266C is as mentioned in Section 266G which reads as under: "266G. Penalty for contravention of provisions of Section 266A or Section 266C or Section 266D or Section 266E.-If any individual or director, re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt only or with imprisonment and also with fine shall not be compoundable." 14. A careful reading of the provisions envisage that it excludes such offences which are punishable with imprisonment only or with imprisonment and also with fine. Thus, on facts, the nature of offence which the company has charged does not invite with imprisonment or imprisonment and fine, but the penalty imposed is punishable with fine, which may extend upto five thousand rupees and where the contravention is continuing one, with a further fine, which may extend to five hundred rupees for everyday thereafter. Thus, the nature of offence is such that it is compoundable, and the same is just and proper. Our view is fortified by the Judgment of the Apex Court in the case of V.L.S. Finance Limited vs. Union of India and others [(2013)6 SCC 278)(V.L.S. Finance Limited) at paragraph Nos.11, 12 and 16, which read as under: "11. From a plain reading of Section 621-A(1) it is evident that any offence punishable under the Act, not being an offence punishable with imprisonment only or with imprisonment and also with fine, may be compounded either before or after the institution of the prosecution by the Company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioned in the non-obstante clause." 15. For the reasons stated supra, we answer point No.(i) in the negative in favour of the company. 16. With regard to point No.(ii), the learned Central Government Standing Counsel appearing for the appellant sought to contend that prior permission of the Court needs to be accorded for compounding of offence is contrary to the intention of the legislature for enacting the provision under Section 621A as the powers under Section 266C are concurrent/parallel powers to be exercised by the Company Law Board/other Authorities or Court in seisin of the matter with a difference that a Company Law Board can proceed to compound such offence either before or after the institution of any prosecution whereas criminal Court possesses similar power to compound such offence only after institution of prosecution and as the Apex Court held in the case of V.L.S. Finance Limited stated supra at paragraph Nos.17 and 18 which read as under: "17. Ordinarily, the offence is compounded under the provisions of the Code of Criminal Procedure and the power to accord permission is conferred on the court excepting those offences for which the permission is not required. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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