Section 441 of Companies Act, 2013 deals with compounding of offences, in this article we will discuss the provisions for compounding of offences under Companies Act, 2013:
Firstly we will discuss the term offence
The term offence has been defined in General Clauses Act, 1897 section 3(38) : The term offence means any act or omission made punishable by any law for the time being enforce.
In todays world its very essential to comply with the provisions of various laws applicable to one’s business. There are laws, the non compliances of which may result in heavy penalties and or imprisonment.
As far as the corporate world is concerned offences of the corporates are divided in to two categories civil and criminal, further classification has been done into compoundable and non compoundable offences.
The compounding of offence is a mean to avoid the litigation in the event of an offence.
There are various benefits of compounding of offences as compared to the litigation:
- The litigation procedure is time consuming as compared to the procedure followed for compounding.
- The litigation procedure is more expensive on the other part in case of compounding of offences the accused can be discharged on payment of composition fee which shall not be more than the maximum fine leviable under the relevant provision of the act.
- In the litigation procedure one has to appear before the magistrate in every hearing through an advocate.
The offences which are punishable with fine can only be compounded under section 441 of the Companies Act, 2013, in other words the offences which are punishable imprisonment or fine and imprisonment both can not be compounded under the provisions of this act.
Authority for Compounding of Offences
- If the fine for which the compounding application is to be filed does not exceed Rs. 5 Lakhs, the application for compounding of offence can be filed with Regional Director or any other officer as may be prescribed by the central government from time to time.
- If the fine exceeds Rs. 5 Lakhs the compounding of offence must be done by National Company Law Tribunal (NCLT)
- If the offence is punishable with imprisonment only or with fine and imprisonment the same shall be compounded with the permission of a special court.
Restriction on compounding of offences under Companies Act, 2013
As per the third proviso to sub section (1) of section 441 , following companies are restricted from compounding their offences:
- In case the investigation has been initiated or is pending against the company.
- If the similar offence has been compounded by the company and three years has not passed.
- Any offence which is punishable with imprisonment or both fine and imprisonment.
How to make an Application for compounding of offences under Companies Act, 2013.
Sub Section 3(a) of Section 441 of Companies Act, 2013 has laid down the procedure for making an application for compounding of offence: According to which every application for compounding of offences shall be made addressing to the Registrar of Companies which shall forward the same along with his comments to the Regional Director of NCLT as may be applicable for the purpose of adjudication.