Compounding of Offence under Companies Act, 2013

Offence: Meaning of offence in general language is a breach of a law or rule. Now, non-observing of law specifically if we are talking about Companies Act, 2013 which is governing law for all companies unless they are regulated by their own industry Acts, can put a company under the lens of Registrar of Companies or other authorities to initiate an action.

When a company contravenes a specific provision of The Companies Act, 2013 by doing something which is barred/ restricted/ limited or in any way prohibited or by not doing which are specifically provided, led to offence by a Company and/or by any officer thereof depending upon the contravention of specific provision/(s).

COMPOUNDING

Compounding of an offence is a settlement mechanism by making the non compliance good, by which, the offender is given an option to pay money in lieu of his prosecution, thereby avoiding a prolonged litigation. There is no definition of the word “compounding” in the Companies Act 2013, however, the legal meaning of compounding is “doing good the default/non-compliance”.

TYPES OF OFFENCE

We can divide Offence into two parts:-

1. Compoundable Offence
2. Non Compoundable Offence

Compoundable Offence

Any offence which is punishable with fine or penalty only under the specific section of the Companies Act, 2013 is compoundable offence.

Non Compoundable Offence

Any offence which is punishable with imprisonment only or with imprisonment and fine or penalty only under the specific section of the Companies Act, 2013 is non compoundable offence.

MAIN CONTENT

The Companies Act, 2013 read with related rules, any compoundable offence may be compounded under section 441 on payment of fees by the company or officer as the case may be, to the Central Government of such sum as directed by Tribunal or the Regional Director or any officer authorised by the Central Government, as the case but such amount to be credited must not exceed the amount of fine/penalty stated under the specific section for whom the application for compounding is made.

The application/ petition for compounding shall be given to:-

1. The  Regional Director or any officer authorised by the Central Government provided maximum amount of fine may be imposed upto INR Twenty Five (25) lakh
2. The tribunal, here tribunal is National Company Law Tribunal, if the amount involved is more than INR Twenty Five (25) lakh

Important Points to be noted before compounding of offence under The Companies Act, 2013

• The application must be followed by any document, required to be submitted, filed, registered or recorded, or any fact or information required or authorised to be registered under this Act, shall be submitted, filed, registered or recorded within the time specified in the relevant provision on payment of such fee as may be prescribed.
• The offence for which compounding application should not be made again within a period of three (3) years.
• offence 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.
• offence 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 compounded
• Where the compounding of any offence is made after the institution of any prosecution, such compounding 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 compounding of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged
• The Tribunal or the Regional Director or any officer authorised by the Central Government, as the case may be, while dealing with a proposal for the compounding of an offence for a default in compliance with any provision of this Act which requires a company or its officer to file or register with, or deliver or send to, the Registrar any return, account or other document, may direct, by an order, if it or he thinks fit to do so, any officer or other employee of the company to file or register with, or on payment of the fee, and the additional fee, along with such return, account or other document within such time as may be specified in the order.

PENAL PROVISION:-

Once a company has filled a application/petition under the Companies Act, 2013 for compounding of offence and the order has been passed by Tribunal or The Regional Director or any officer authorised by the Central Government shall be binding.

Hence, Any officer or other employee of the company who fails to comply with any order made by the Tribunal or the Regional Director or any officer authorised by the Central Government under sub-section (4) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding one lakh rupees, or with both.

Disclaimer:– The above article is extract of Section 441 under the Companies Act, 2013. While making an application, there are other important aspects also which are considered and are kept in mind while preparing them as cases varies and depend upon merits of the company’s profile. Hence, the professional/(s) who are involved should consider the whole case. The author shall not liable for any direct, indirect, special or incidental damage resulting from, arising out of or in connection with the use of the information.

(The Author is Corporate Consultant and provides varied array of services including Start-ups, Secretarial, Legal, Intellectual property, taxation, Audit, GST, Book keeping and other ancillary advisory service in Delhi, Chandigarh as well as The National Capital Region (NCR) and can be contacted through email id:- triptishakyacs2017@gmail.com)