Tribunal overturns fine reduction, imposes Rs. 42,45,000 penalty for Companies Act violation.

The National Company Law Tribunal, New Delhi Bench, set aside an order that reduced a fine below the prescribed minimum under Section 165(6) of the Companies Act, 2013. The Tribunal imposed a fine of Rs. 42,45,000 on the Respondent for a default period of 849 days, rejecting arguments that the penalty was not mandatory. The Respondent was directed to pay the fine within 45 days, and the appeal was allowed without costs awarded.

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Issues:
Compounding of offence under Section 165(6) of Companies Act, 2013 - Reduction of fine below prescribed minimum.

Analysis:
The Respondent filed an application for compounding of an offence under Section 165(6) of the Companies Act, 2013, which was compounded by the National Company Law Tribunal, New Delhi Bench, reducing the fine to Rs. 10 lakhs. The Tribunal justified this decision by stating that despite the prescribed minimum fine, it deemed it appropriate to direct compounding of the offence with the specified fee. The Company Prosecutor highlighted the provisions of Section 165(6) which mandate a minimum fine of Rs. 5,000 per day for contravention. The Respondent argued that the penalty under this section is not mandatory. However, the Tribunal disagreed, stating that since the legislation prescribes a minimum fine, it cannot be reduced below that amount. The Tribunal noted that the default continued for 849 days, from April 1, 2015, to July 18, 2017, and the fine should have been between Rs. 5,000 to Rs. 25,000 per day.

The Company Prosecutor calculated the total fine based on the prescribed rates, amounting to Rs. 42,45,000 for Rs. 5,000 per day and Rs. 2,12,25,000 for Rs. 25,000 per day for the 849 days of default. Upon review, the Tribunal found that the impugned order was passed in contravention of Section 165(6) of the Companies Act, 2013, as the fine was reduced below the prescribed minimum. Consequently, the Tribunal set aside the impugned order and imposed a fine of Rs. 42,45,000, considering the facts and circumstances of the case. The Respondent was directed to pay this amount within 45 days. The appeal was allowed with the above observations, and no costs were awarded.

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