Startup Salahkar

logo
Puja Mohan & Associates
Company Secretaries
  • +91 93309 55300
  • startupsalahkar@gmail.com
Menu

Compounding of Offences

Compounding of Offences under the Companies Act, 2013

1. Meaning

Compounding of offences under the Companies Act, 2013 is a process where a company or its officers can settle certain offences by paying a penalty, subject to approval by the designated authority. This allows the resolution of non-compliance without resorting to lengthy court proceedings.

Get a Quote

    2. Legal Framework

    Compounding is governed by Section 441 of the Companies Act, 2013, which specifies the conditions and authorities involved in the process.

    Key Features:

    • Compoundable Offences:
      • Only offences punishable with fine or imprisonment or fine can be compounded.
      • Offences punishable with imprisonment only or imprisonment and fine cannot be compounded.
    • Authorities for Compounding:
      • Regional Director (RD): For offences with a maximum fine of up to ₹50 lakh.
      • National Company Law Tribunal (NCLT): For offences with a maximum fine exceeding ₹50 lakh.
    • No Double Prosecution:

    Once an offence is compounded, no further legal proceedings can be initiated for the same matter.

    3. Procedure for Compounding

    1. Application Submission:
      • The company or its officers must file an application for compounding with the appropriate authority (RD or NCLT), providing details of the offence and reasons for seeking compounding.
    2. Hearing and Order:
      • The authority may conduct a hearing and determine the penalty amount based on the nature and severity of the offence.
    3. Payment of Penalty:
      • The penalty must be paid within the specified time frame as directed by the authority.
    4. Intimation to Registrar of Companies (RoC):
      • The company must notify the RoC about the compounding order and compliance with the penalty.

    4. Examples of Compoundable Offences

    • Delay in filing financial statements or annual returns (Sections 137 and 92).
    • Failure to file resolutions passed by the Board (Section 117).
    • Non-repayment of deposits or interest on deposits (Section 73).

    5. Benefits of Compounding

    • Avoids Litigation: Saves time and legal costs by settling matters outside court.
    • Reduced Liability: Penalties are often less than the maximum fine prescribed for the offence.
    • Restores Compliance: Helps the company regularize its operations without facing criminal prosecution.
    •  

    6. Offences Not Eligible for Compounding

    • Offences involving fraud, deceit, or willful misconduct.
    • Offences punishable with imprisonment only or both imprisonment and fine.

    Conclusion:
    Compounding of offences under the Companies Act, 2013 provides an efficient way to address non-compliance while promoting adherence to corporate regulations. It balances the need for enforcement with the goal of reducing unnecessary litigation and ensuring smoother corporate governance.