COMPANIES ACT COMPOUNDING OF OFFENCES : BEFORE OR AFTER INITIATION OF CRIMINAL PROCEEDINGS

NCLT

NCLT Bench of Hyderabad in its order in the case of Teamasia Semiconducters (India) Ltd. ("TSL") observed that the Company Law Board and currently the NCLT shall have the power to compound offences U/s 621A of the Companies Act, 1956 (corresponding provision not enforced under the 2013 Act) either before or after the institution of criminal proceedings. This was based on the decision made by a larger bench of CLB in the case of Hoffland Finance Ltd. in 1997.

Brief facts of the case are that TSL received a show cause notice from ROC-Hyd for not appointing a Woman Director, for which TSL reverted saying it has no commercial operations and is proposing to wind up. Not convinced, the ROC-Hyd filed a complaint before Economic Offences Court. TSL made its representations before the Hon'ble Court and in the mean time appointed a Woman Director. TSL filed the present application before erstwhile CLB, Chennai Bench for compounding of offence. 

The issue to be decided is whether NCLT has the power to compound the offence when the criminal proceedings have already been initiated and NCLT decided it in affirmative. NCLT directed the Company to pay a compounding fee of Rs. 1,00,000/- and the 3 Directors a fee of Rs. 50,000/- each. 

NCLT Bench of Hyderabad made similar observation in the case of M/s ICOMM Tele Ltd. by compounding the offence even when the criminal proceedings have been initiated.

Click to read the full order:

Teamasia Semiconducters (India) Ltd.