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of <h1>CLB can compound offenses under Companies Act independently, no need for criminal court approval.</h1> <h3>VLS. Finance Ltd. Versus Union of India and others</h3> The Supreme Court upheld the Delhi High Court's decision, affirming that the Company Law Board (CLB) has the authority to compound offences under Section ... Appeal against CLB for assailing compounding of offences – u/s 211(7) of the Companies Act, 1956 - whether the CLB can compound offence punishable with fine or imprisonment or both without permission of the court? Facts of the case Company had taken a land from New Delhi Municipal Corporation on licence and the Company only pays the yearly licence fee thereof. Thus, according to the complainant, without any right land has been shown as land in the Schedule of fixed assets, which is not a true and fair view and punishable under Section 211(7) of the Companies Act, hereinafter referred to as “the Act”. Before the court in seisin of the case could proceed with the complaint, the Company and its Managing Director jointly filed an application before the CLB for compounding the offence. CLB, by its order dated 9th of August, 2000 acceded to the prayer. Which gives rise to present appeal. Held that:- The power under sub-section (1) and sub-section (7) of Section 621A are parallel powers to be exercised by the CLB or the authorities mentioned therein and prior permission of Court is not necessary for compounding the offence, when power of compounding is exercised by the CLB. Thus, the impugned order cannot be interfered. Issues Involved:1. Jurisdiction of the Company Law Board to compound offences under Section 211(7) of the Companies Act.2. Interpretation of Section 621A of the Companies Act regarding compounding of offences.3. Requirement of permission from the criminal court for compounding offences by the Company Law Board.Issue-wise Detailed Analysis:1. Jurisdiction of the Company Law Board to compound offences under Section 211(7) of the Companies Act:The appeal arose from an order by the Delhi High Court dismissing a challenge to the Company Law Board's (CLB) decision to compound an offence under Section 211(7) of the Companies Act. The Registrar of Companies alleged that the company's balance sheet falsely included land worth Rs. 21 crores as a fixed asset, which was only held under a license. The company and its Managing Director applied to the CLB for compounding the offence, which the CLB granted. The CLB held that its power to compound offences under Section 621A(1) was independent of the criminal court's powers under sub-section (7), and no prior permission from the court was necessary. The High Court upheld this view, stating that both the CLB and the criminal court have parallel powers to compound offences, and one is not dependent on the other.2. Interpretation of Section 621A of the Companies Act regarding compounding of offences:Section 621A allows for the compounding of offences not punishable with imprisonment only or with imprisonment and also fine. The appellant contended that the CLB lacked jurisdiction to compound an offence under Section 211(7), which provides for imprisonment or fine or both. The court clarified that Section 621A(1) excludes offences punishable with imprisonment only or with imprisonment and also fine, and includes offences punishable with fine or imprisonment or both. Thus, the CLB had the authority to compound the offence under Section 211(7), which falls under the category of offences punishable with fine or imprisonment or both.3. Requirement of permission from the criminal court for compounding offences by the Company Law Board:The appellant argued that the CLB required the criminal court's permission to compound the offence. The court disagreed, noting that both Section 621A(1) and Section 621A(7) start with a non-obstante clause, indicating that the CLB can exercise its power to compound offences either before or after the institution of any prosecution. The criminal court, however, can only compound offences after the institution of prosecution. The legislature did not include a requirement for the CLB to seek prior permission from the court, and adding such a requirement would be impermissible. The court emphasized that statutory interpretation should avoid adding or rejecting words unless necessary to achieve the Act's purpose.Conclusion:The Supreme Court upheld the Delhi High Court's decision, affirming that the CLB has the authority to compound offences under Section 211(7) without requiring prior permission from the criminal court. The appeal was dismissed without any order as to costs.
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