Tribunal permits compounding of offenses for late Cost Audit Reports filing

The Tribunal allowed the compounding of offences under Section 441 of the Companies Act, 2013, for default in filing Cost Audit Reports under Section 233B of the Companies Act, 1956. The company and its Managing Director were directed to pay a compounding fee of Rs. 15,000 and Rs. 1,50,000, respectively, within three weeks to the relevant Head of Account of MCA. The Tribunal emphasized that the decision was in line with statutory provisions and judicial precedents, ensuring fair treatment without compromising stakeholders' interests.

---

---

Issues Involved:
1. Compounding of offence under Section 441 of the Companies Act, 2013.
2. Default in filing Cost Audit Reports under Section 233B of the Companies Act, 1956.
3. Jurisdiction and authority of the Tribunal to compound offences.
4. Quantum of compounding fee to be imposed.

Detailed Analysis:

1. Compounding of Offence under Section 441 of the Companies Act, 2013:
The applicants, a company and its Managing Director, filed an application under Section 441 of the Companies Act, 2013, seeking compounding of offences under Section 233B of the Companies Act, 1956. The application was served on the Registrar of Companies (ROC), but no reply was filed by the ROC. The applicants admitted default in filing Cost Audit Reports for the financial years 2011-12, 2012-13, and 2013-14, attributing the delay to technical reasons beyond their control.

2. Default in Filing Cost Audit Reports under Section 233B of the Companies Act, 1956:
The Central Government directed the company to audit cost records and file Cost Audit Reports per the Companies (Cost Audit Report) Rules, 2011. The company appointed M/s. S.K. Saxena Verma & Co. as Cost Auditors, who conducted the audits and submitted their reports. However, due to technical problems in the MCA portal, the reports could not be filed within the prescribed period. The company eventually filed the reports on 4th October 2017, after concerted efforts and follow-up with the c-Governance Cell of MCA.

3. Jurisdiction and Authority of the Tribunal to Compound Offences:
The Tribunal noted that Section 441 of the Companies Act, 2013, as amended, allows the Tribunal to compound offences punishable with fine only, or with fine and imprisonment, except those punishable with imprisonment only. The Tribunal referred to judgments from the Hon'ble NCLAT and NCLT, which clarified that the Tribunal has the power to compound offences irrespective of the quantum of punishment and without the need for prior permission from the Special Court, except in cases where the offence is punishable with imprisonment only or with imprisonment and fine.

4. Quantum of Compounding Fee to be Imposed:
Considering the company's turnover of approximately Rs. 211 Crores and the fact that the default was due to technical reasons, the Tribunal decided not to take a lenient view in imposing the compounding fee. The maximum fine for the company under Section 233B(11) is Rs. 5,000 per year, and for the Managing Director, it is Rs. 50,000 per year. The Tribunal directed the company to pay a compounding fee of Rs. 5,000 for each year and the Managing Director to pay Rs. 50,000 for each year. The total compounding fee payable by the company and the Managing Director is Rs. 15,000 and Rs. 1,50,000, respectively.

Conclusion:
The Tribunal directed the applicants to remit the compounding fee to the relevant Head of Account of MCA within three weeks and report compliance before the Tribunal. The Tribunal's decision was based on the provisions of the Companies Act, 2013, as amended, and relevant judicial precedents, ensuring that the offences were compounded appropriately without causing prejudice to the interests of members, creditors, and other stakeholders dealing with the company.

---