Permission of Special Court- No more required for Compounding of Offence under Companies Act, 2013
Before the amendment brought by the Companies (Amendment) Ordinance 2018, the permission of the ‘Special Court’ was required for compounding of any offence which is punishable under this Act, with imprisonment or fine, or with both. The sub-section (6) of the Companies Act, 2013 (“CA, 2013”) before the amendment may be read as under-
“(6) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974),-
(a) any offence which is punishable under this Act, with imprisonment or fine, or with imprisonment or fine or with both, shall be compoundable with the permission of the Special Court, in accordance with the procedure laid down in that Act for compounding of offences.
(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.”
Such offences can now be compounded without the permission of the Special Court in view of the said amendment carried in Companies (Amendment) Act, 2019, effective from 2nd November, 2018.
Now amended Sub-section (6) of CA, 2013 may be read as under-
“(6) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.”
According to Section 441(1) of the CA, 2013, as amended by the Companies (Amendment) Act, 2017 w.e.f. 09.02.2018 and the Companies (Amendment) Ordinance, 2018 which is also carried in Companies (Amendment) Act, 2019, effective from 02.11.2018.
“(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), any offence punishable under this Act (whether committed by a company or any officer thereof) not being an offence punishable with imprisonment only, or punishable with imprisonment and also with fine, may, “either before or after the institution of any prosecution”, be compounded by-
(a) the Tribunal; or
(b) where the maximum amount of fine which may be imposed for such offence does not exceed twenty-five lakh rupees, by the Regional Director or any officer authorised by the Central Government.
on payment or credit, by the company or, as the case may be, the officer, to the Central Government of such sum as that Tribunal or the Regional Director or any officer authorised by the Central Government, as the case may be, may specify.
Provided that the sum so specified shall not, in any case, exceed the maximum amount of the fine which may be imposed for the offence so compounded.
Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under this sub-section, the sum, if any, paid by was of additional fee under sub-section (2) of section 403 shall be taken into account.
Provided also that any offence covered under this sub-section by any company or its officer shall not be compounded if the investigation against such company has been initiated or is pending under this Act.”
It is submitted that this section begins with the clause “Notwithstanding anything contained in Cr.P.C., 1973”, since the criteria for compounding under Section 320 of Cr.P.C. is very different compared with CA, 2013, therefore, this clause has been added to remove any inconsistencies.
Pursuant to sub-section (3)(b) of the CA, 2013, wherein the offence has been compounded, either before or after the institution of any prosecution, an intimation shall be given to the Registrar of Companies within seven days from the date on which, the offence is so compounded. In case the offence has been compounded before the institution of any prosecution, no prosecution shall be filed either by ROC or by any shareholder or by any person authorized by the Central Government. [Sub-section (3)(c)].
Further, sub-section (3)(d) of the CA, 2013 provides that 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 offence can be compounded after the institution of any prosecution. It is stated that in case of prosecution for an offence in a criminal court, the accused has to appear before the Magistrate at every hearing through an advocate. Further, court proceedings are time consuming and expensive. However, in case of compounding, the accused need not appear personally and can be discharged on payment of composition fee which cannot be more than the maximum fine leviable under the relevant provision.
PENAL PROVISION [Sub-section (5)]: –
Once a company has filed an application under the CA, 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.
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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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