NCLT Compounds Delay in Holding AGM by Kolhapur Hotels

Kolhapur Hotels Pvt. Ltd. Vs Registrar of Companies Pune (NCLT Mumbai)

The National Company Law Tribunal (NCLT), Mumbai Bench, considered a petition filed by Kolhapur Hotels Private Limited and its two directors under Section 441 of the Companies Act, 2013 seeking compounding of an offence arising from non-compliance with Section 96, read with Section 99, for failure to hold the Annual General Meeting (AGM) for FY 2016-17 within the prescribed time.

The petitioners sought compounding of the default, requested that the continuous default be brought to an end, and prayed for directions restraining the Registrar of Companies (RoC), Pune from taking coercive action. The company also sought appropriate relief under Sections 96, 99 and 441 of the Companies Act, 2013.

The company, incorporated on 22 April 1985, submitted that it had maintained statutory compliance since incorporation, had conducted AGMs up to FY 2015-16, and had regularly filed its income tax returns. It explained that it had only two shareholders. After the death of one shareholder, who held 90% of the shareholding, on 28 March 2017, the remaining shareholder became the sole surviving member. According to the company, it was unable to constitute the quorum required under Section 103(1)(b) for holding general meetings. It further stated that no request or intimation for transmission of the deceased shareholder’s shares had been received.

The company submitted that it filed unadopted financial statements for FYs 2016-17 to 2021-22 along with the corresponding income tax return acknowledgements. While filing Form AOC-4, it also furnished explanatory statements before the RoC explaining why AGMs for those years could not be convened.

The Ministry of Corporate Affairs (MCA) had issued a show cause notice dated 4 November 2019 under Section 99 for non-compliance with Section 96. In response, the company explained that the AGM could not be held due to the death of one shareholder and the absence of transmission of shares and also sought guidance for convening the AGM.

The RoC, Pune, in its report dated 24 March 2025, confirmed that the company and its directors had violated Section 96. It recorded that the default related to FY 2016-17, where the AGM due on 30 September 2017 was eventually held only on 8 September 2020. The RoC stated that this was the first offence under the relevant provision and that no prosecution, winding-up proceedings, or other violations were pending against the company. It also noted that the offence was compoundable by the NCLT.

The RoC calculated the maximum fine under Section 99 by considering a continuing default of 2,725 days, arriving at Rs. 1,37,25,000 each for the company and each officer in default.

During the hearing, the petitioners argued that the company qualified as a small company and was therefore entitled to the benefit of Section 446B, which prescribes reduced penalties. They also relied on an NCLAT decision to contend that the Tribunal could determine the quantum of compounding irrespective of statutory limits.

The RoC opposed this contention, submitting that Section 446B applies only where the statute prescribes a “penalty”, whereas Section 99 prescribes a “fine” for failure to hold AGMs. Therefore, according to the RoC, the benefit of Section 446B was not available.

The Tribunal agreed with the RoC’s submission. It observed that the legislature had consciously used the expressions “penalty” in Section 446B and “fine” in Section 99, and that the two expressions could not be treated as identical. It further held that where the statutory language is clear and unambiguous, there is no scope for adopting a purposive interpretation.

After considering the facts and circumstances, the Tribunal compounded the offence under Section 96. While noting that there was no dispute regarding the RoC’s computation of the maximum fine, it determined the compounding fee at Rs. 13,63,500 each for the company and the two directors, aggregating to Rs. 40,90,500.

The Tribunal directed the petitioners to deposit the compounding fee with the Pay and Accounts Officer, Ministry of Corporate Affairs, Mumbai, through Bharat Kosh within 30 days from receipt of the order. It also directed that the offence would stand compounded only upon payment of the prescribed amount and required a compliance report to be placed on record. A copy of the order was directed to be sent to the Registrar of Companies, Mumbai.

Accordingly, the company petition was allowed and disposed of.

FULL TEXT OF THE NCLT JUDGMENT/ORDER

1. The present Company Petition is filed on 26.07.2023 by Kolhapur Hotels Private Limited and Ors. (Petitioners/Petitioner Nos. 1, 2 and 3) under Section 441 of the Companies Act, 2013 for Compounding of Default under Section 96 of the Companies Act, 2013 along with Section 99 of the Companies Act, 2013 (the “Act 2013”), praying therein for compounding of default for not holding its Annual General Meeting (AGM) within the time stipulated under the provisions of Section 96 of the Act 2013, for the Financial year (FY) 2016-17 which has resulted in the aforementioned default prescribed under the Act, 2013.

2. In accordance with the instant petition, following relief have been sought:

a. Permit compounding of the default occurred by Petitioners under Section 96 in exercise of its power, as per the provisions of Section 441 of the Act for all the financial years where Annual General Meeting is not held;

b. Pass appropriate orders to put an end to the continuous default. occurring under Section 96 of the Act in exercise of its inherent power, on account of non-availability of quorum in the Annual General Meeting of the Petitioner Company;

c. Direct the Registrar of Companies, Pune not to take any coercive action against the Petitioner No. 1 Company or any of Directors including Petitioners pursuant to the default under Section 96 of the Act;

d. Pending the final hearing and disposal of the present Company Petition direct the Registrar of Companies, Pune / the Assistance Registrar of Companies, Pune / Ministry of Corporate Affairs not to take any coercive or prejudicial action against the Petitioners;

e. Grant/pass appropriate relief/orders/directions, in terms of sections 96, 99 and/or 441 of the Act, as this Hon’ble Tribunal may deem fit, in the interest of justice.

3. The Petitioner No. 1 Company is a Private Company incorporated on 22.04.1985 as per the provisions of the Companies Act, 1956. The present registered office of the company is situated at 9, Jai Prakash Narayan Garden, Pune – 411001.

4. The Main object of the Company as mentioned in the paragraph III(A)(1) of the Memorandum of Association of the Company is as follows:

“To carry on the business of owning, acquiring, constructing, operating, conducting, running to take on rent, hire, to give on rent, hire, residential hotels, restaurants, lodging and Boarding houses, cafes refreshment rooms, motels, tea house, coffee houses, liquor bar, foods stalls, fruit, stall, milk bars and/or/other places for selling and consumption of food, places of amusement. recreation, sport, entertainment.”

5. The Authorized share capital of the petitioner company is as follows:

6. The Petitioners submits that, since its incorporation in the year 1985, Petitioner No. 1 Company has maintained a record of compliance with the applicable statutory requirements. It is stated that the Company duly convened its Annual General Meetings up to the Financial Year 2015–16 and has also been regular in filing its income tax returns.

7. It is submitted that the Petitioner No. 1 Company had only two shareholders, namely, Mr. Kanhaiyalal Motilal Talera, holding 90% of the shareholding, and Mr. Praful Kanhaiyalal Talera, holding the remaining 10%. Upon the demise of Mr. Kanhaiyalal Motilal Talera on 28.03.2017, Mr. Praful Kanhaiyalal Talera remained the sole surviving member of the Petitioner No. 1 Company. Consequently, the Company has been unable to constitute the requisite quorum for convening and holding any general meeting as prescribed under Section 103(1)(b) of the Act, 2013. It is further submitted that, till date, the Petitioner No. 1 Company has not received any intimation or request for transmission of the shares standing in the name of Late Mr. Kanhaiyalal Motilal Talera from any person informing that he/they are the persons in whom the right to get transmission of shares of the Petitioner No. l Company, registered as the person/persons to whom rights have been transmitted, as per the applicable personal law to Late Mr. Kanhaiyalal Motilal Talera.

8. The Petitioners submits that, the Petitioner No. 1 Company prepared and filed the unadopted Financial Statements for the Financial Years 2016–17 to 2021– 22, along with the acknowledgements of the corresponding Income Tax Returns. Further, while filing Form AOC-4, the Petitioner No. 1 Company also furnished a separate explanatory statement before the Registrar of Companies, Pune (“ROC, Pune”), setting out the factual circumstances and reasons due to which the Annual General Meetings for the aforesaid financial years could not be convened.

9. It is submitted that the MCA issued a Show Cause Notice dated 04.11.2019 under Section 99 of the Companies Act, 2013 to the Petitioner Company and its directors for non-compliance with Section 96 of the Act. In reply dated 13.11.2019, the Petitioner Company explained that the AGM could not be convened due to the demise of Mr. Kanhaiyalal Motilal Talera and the absence of any intimation regarding transmission of his shares, and sought guidance for convening the AGM.

10. Accordingly, the Petitioners have filed the present petition under Section 441 read with Section 96 of the Companies Act, 2013, seeking compounding of the offence punishable under Section 99 of the Act.

11. The RoC, Pune has filed its report dated 24.03.2025 and we have perused the same. The Report states that the Company and its director violated the provision of Section 96 of the Act 2013. Further, RoC Pune report states that this is the first offence committed by the Petitioner Company under this Section. Relevant extract of the RoC Pune report is reproduced hereunder:

32. Heard the Ld. Counsel for the petitioners and Mr. Parvez Naikwadi, ROC, Pune and perused the Petition as well as the RoC Report.

33. In view of the above, we are of considered view that the Petitioners herein have defaulted in complying with the provisions of Section 96 of the Companies Act, 2013 which offence is punishable in accordance with Section 99 of the Companies Act, 2013. Section 96 and Section 99 of the Act 2013 reads as follows:

“Section 96: Annual General Meeting

(1) Every company other than a One Person Company shall in each year hold in addition to any other meetings, a general meeting as its annual general meeting and shall specify the meeting as such in the notices calling it, and not more than fifteen months shall elapse between the date of one annual general meeting of a company and that of the next.

Provided that in case of the first annual general meeting, it shall be held within a period of nine months from the date of closing of the first financial year of the company and in any other case, within a period of six months, from the date of closing of the financial year:

Provided further that if a company holds its first annual general meeting as aforesaid, it shall not be necessary for the company to hold any annual general meeting in the year of its incorporation.

Provided also that the Registrar may, for any special reason, extend the time within which any annual general meeting, other than the first annual general meeting, shall be held, by a period not exceeding three months.

…”

“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.”

34. During the course of hearing, the Ld. Counsel for the Petitioners submitted that the Petitioner Company qualifies as a small company and is therefore entitled to the benefit of Section 446B of the Act, 2013. It was contended that, in view of the said provision, the penalty imposable cannot exceed Rs. 2,00,000 in respect of the Company and Rs. 1,00,000 in respect of the officer in default. Further, the Ld. Counsel relied upon the judgment of the Hon’ble NCLAT in Pahuja Takii Seed Ltd. & Ors. v. Registrar of Companies, NCT of Delhi & Haryana (2018) in 341 NCLAT, decided on 27.09.2018, to contend that the Tribunal is empowered to determine the quantum of compounding of offences irrespective of any limit. It was further contended that, in terms of Section 441 of the Companies Act, 2013, both the Registrar of Companies and this Tribunal have jurisdiction in matters relating to compounding of offences under the Act.

35. Per contra, Mr. Pravez Naikwadi, RoC, Pune, submitted that although the Petitioner Company is as a small company, the benefit of Section 446B of the Companies Act, 2013 is confined to cases involving imposition of a “penalty” under the Act. It was contended that the said provision does not extend to a “fine” prescribed for contravention of Section 96 and punishable under Section 99 of the Act. Therefore, the benefit of Section 446B is not available to the Petitioners in the present case.

36. Considering the rival submission of the parties, we observe that in the Section 446B of the Act, 2013, the word used is “penalty”, whereas in the provision of the Section 99 of the Act, 2013, the word used is “fine”. These two separate words have been used by the legislator in different provision of the law and therefore, the same cannot mean one and the same thing. Further, when the literal interpretation of law is clear and unambiguous, the purposive interpretation or any reading into the law as canvassed by the Ld. counsel of the Petitioners cannot be resorted to.

37. Accordingly, having regard to the facts and circumstances of the case, the offence committed under Section 96 of the Companies Act, 2013 as stated and explained above, is hereby compounded with. It is mentioned that in this case there is no dispute as to the maximum fine as calculated by the RoC. The Compounding Fee is calculated in the manner tabulated below:

38. As stated above, this Tribunal considers it appropriate to compound the offence committed by the Petitioner Company (Petitioner No. 1), Mr. Vijay Govind Kuratadkar (Petitioner No. 2) and Mr. Anant Deu Gawade (Petitioner No. 3) under section 96 of the Companies Act, 2013 by determining a compounding fee of 40,90,500/- (Rs. 13,63,500 for Petitioner No. 1, Rs. 13,63,500 for Petitioner No. 2 and Rs. 13,63,500 for Petitioner No. 3) to be paid by the Petitioners to “Pay and Accounts Officer, Ministry of Corporate Affairs, Mumbai” through Bharat Kosh within 30 days from the receipt of this order. The Tribunal is of the view that the said compounded fee is sufficient as a deterrent for not repeating the admitted default in future.

39. Needless to mention, the offence shall stand compounded subject to the remittance of the Compounding Fee imposed. A compliance report, therefore, shall be placed on record.

40. The Registry shall send a copy of this order to the Registrar of Companies, Mumbai.

41. Accordingly, the C.P. 188 of 2023 is allowed and disposed of on above terms. File to be consigned to records.