The notion of compounding of offences is not new. Related provisions were also present in Section 621A of the Companies Act, 1956. While there is no definition of the word “compounding” given either in the Act 1956 or the Act 2013, however, in the legal sense compounding means “doing good the noncompliance/default”. It is an “agreement” for the offence committed by any company or any officer thereof.
Non-compliance with the provisions of the Companies Act, 2013 will attract penalties and/or imprisonment as provided under the Act. Further, offences under the Act have been categorised as Compoundable and Non-compoundable offence. Compounding of offence is a procedure whereby the entity or person committing default will file an application to the compounding authority with the consent that it has committed an offence and so that same should be accepted. The compounding authority may compound the offence and ask the defaulting party to deposit compounding fee as decided by it on a case to case basis. Once the said compounding fee is paid, the defaulting party will no longer be treated in default of the offence which has been so compounded. The provisions relating to compounding of offences under the Act are specified under Section 441 of Act.
Section 441 of the Act provides for compounding of following offences:
The offences which cannot be compounded under the Act are the following :
An important precondition for filing application for compounding is to know where the application should be filed. This is given in section 441 itself:
Any employee or officer of the company who has failed to follow any order made by the concerned authority under Section 441, shall be punishable with imprisonment for a term which may extend to 6 months, or with fine not exceeding 1 lakh rupees, or with both. Examples of offences compoundable under the Act :
To file an application for compounding of offence by any officer or company in default:
In order to uplift the ease of doing business in India and to lessen the pendency of cases filed with courts, the Ministry of Corporate Affairs has established an expert panel to give a report regarding simplification of the imposition of penalties for minor violations under the Act involving certain penalties related to corporate governance and technical defaults The panel has suggested that sixteen technical defaults and corporate governance offences be moved out of the area of courts. The panel has put forward that only fine should be levied in Twelve offences and for other four, either imprisonment or fine or both could be levied. The panel also suggested making revisions in penalties imposed on serious offences. Where a company or its officer or officers become aware of some default under the Companies Act, 2013 it would always be recommended to avail the benefit of compounding provisions under the Act so that the company remains fully compliant with the provisions of the Act.