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Section 441 of the Companies Act, 2013 (CA, 2013) deals with Compounding of offence. Compounding of offences is not new under the Company Law; similar provisions were also present in Section 621A of the Companies Act 1956 (erstwhile Act). We are only discussing herewith about the filing of application for compounding of offence which shall be submitted eclectically.

It is submitted that the company shall hold a Board Meeting to pass a resolution to file application with authority for compounding of offence and authorize director of the Company for preparation and signing of documents including application. The Company may also authorize any professional for follow up the matter with authority. It is also pertinent to note that please calculate the amount of penalty for the offence as per relevant section. Thereafter, the company should prepare a compounding application which will be prepare as per National Company Law Tribunal Rules 2016 (“NCLT Rules”).

It is stated that application for compounding shall be submitted electronically in e-­form GNL­1. User can file application seeking approval from Registrar of Companies by filing application in e-Form GNL-1 for different purposes under CA, 2013. The application can be filed for Company, Director or Manager/Secretary or Others. This form will be forwarded by Registrar of Companies (“ROC”) to NCLT/Regional Director as applicable.

It is submitted that ‘compounding application’ shall include-

– General Profile and History of the company containing details such as name, date of incorporation, main objects of the company;

– The fact of the case mentioning nature of offence and period of default.

– Particular section which has been violated and section under which default is punishable along with the details of applicable penalty.

– The details as to how the default has been made good indicating the date on which the default has been made good, wherever applicable;

– Prayer to compounding authority for compounding of offences.

It is pertinent to mention that e-Form GNL-1 can be used for compounding of maximum 8 persons excluding the company. If number of persons is greater than 8, then additional details can be provided in optional attachment. Further, the following attachments are also required to submit with e-Form GNL-1.

  • Detailed compounding application is required in Triplicate;
  • Board resolution passed for the purpose of making an application;
  • Affidavit verifying the application/petition;
  • Memorandum of appearance or power of attorney;
  • Copy of notice received from ROC or any other competent authority in case application for compounding of offence is filed in pursuance to notice received from ROC or any other authority;
  • Other documents based on requirements.

Upon receiving the application, the ROC would be forwarding the same to the NCLT or Reginal Director, based on the type of offence and penalties imposed. If the offence has been compounded, the ROC will be notified of the same within seven days from the date of compounding. If the offence has been compounded prior to the institution of any prosecution, the concerned authorities would be restricted from the filing of any prosecution.

Disclaimer: Nothing contained in this document is to be construed as a legal opinion or view of either of the authors whatsoever and the content is to be used strictly for educative purposes only.

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May 2024