Practical Process for Compounding of offences under Companies Act, 2013

Chirag Gupta 16 Jun 2025 2,331 Views 0 comment Print Company Law | Articles

Summary: Compounding of offences under the Companies Act, 2013, as outlined in Section 441 (formerly Section 621A of the 1956 Act), provides a mechanism for companies and their officers to settle certain defaults by paying a prescribed amount instead of facing prosecution. This process is overseen by either the National Company Law Tribunal (NCLT) or the Regional Director (RD), with the RD handling cases where the maximum fine does not exceed INR 25 Lakhs. Offenses punishable only by a fine are generally compoundable. However, offences punishable solely with imprisonment, or with both imprisonment and a fine, or those that have been compounded within the preceding three years, or are under investigation, are typically not compoundable. The practical process involves convening a board meeting to authorize the compounding application and professional appointments, preparing and filing e-Form GNL-1 with the Registrar of Companies (ROC) along with supporting documents, and delivering hard copies. The ROC then forwards the application to the relevant authority (RD or NCLT) for a personal hearing. Upon approval, the compounding fees must be paid within a specified timeframe, and the NCLT or RD issues an order, which is then intimated to the ROC via e-Form INC-28.

Introduction: Section 441 of Companies Act, 2013 (this “Act“) and Section 621A of Companies Act, 1956 dealt with the provisions of Compounding of certain offences. Compounding is settlement mechanism under which party in default or the offender pays some prescribed amount of money to the competent authority i..e, Central Government (Power delegated to Regional Director (“RD“)) in lieu of getting prosecuted. As per section 441(1) of Companies Act, 2013, any offence committed by any officer or the company under this Act may be compounded by;

1.National Company Law Tribunal (“NCLT“)

2. Regional Director (Where maximum amount of fine imposed for such offence not exceed INR 25 Lakhs)

COMPOUNDABLE OFFENCES

NON COMPOUNDABLE OFFENCES

Offences that are punishable with “fine” only.

Offences that are punishable with “imprisonment” only;

Offences that are punishable with “imprisonment” and “fine”.

Offences that are punishable with “fine” or “imprisonment”.

Similar offence has been compounded and 3 (Three) years has not expired;

If investigation is initated or undergoing for an offence under this Act.

PRACTICAL PROCESS FOR THE COMPOUNDING UNDER THIS ACT

Step 1: Convene a board meeting

Step 2: Pass the following resolutions in the board meeting;

File an application for the compounding of an offence;
Authorise director or any other officer to file an application on behalf of company;
To appoint professionals (CA/CS/Lawyers) to appear before the authority.

Step 3: Prepare the compounding application.

Step 4: File the e-Form GNL-1 to the Registrar of Companies (“ROC“) by paying INR 1000 fees or such other fees prescribed under NCLT Rules, 2016 along with the following attachments;

Compounding application and affidavit verifying the application
Memorandum of Appearence (MOA) or Power of Attorney (POA)
Board Resolution for filing application
Copy of notice from ROC received , if any
Other necessary documents

Step 5: Deliver hard copy of compounding application along with GNL-1 form and challan to ROC.

Step 6: Based on the amount of fine, ROC forwards the application to RD or NCLT along with his comments.

Step 7: Perosnal hearing before NCLT or RD

Step 8: Payment of compounding fees within the stipulated timeline. [Note: Compounding fine shall not exceed the maximum fine imposed under this Act for an offence so compounded]

Step 9: Passing of order by NCLT or RD

Step 10: File the e-Form INC-28 to ROC for intimation of NCLT or RD order to ROC.

VARIOUS CASE LAWS RELATED TO COMPOUNDING