NCLT Hyderabad: Power to Compound Offences Confirmed

The NCLT Hyderabad Bench allowed the application to compound the offence under Section 217(2AA) of the Companies Act, 1956. The Tribunal confirmed its jurisdiction and power to compound such offences without requiring court permission, in accordance with established judicial precedents. Each applicant was directed to pay Rs. 20,000 as compounding fees within three weeks. The Tribunal also instructed the Registry to send a certified copy of the order to the SEBI Chairman for appropriate action, as the applicant company is listed.

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Issues Involved:
1. Jurisdiction and power of NCLT to compound offences under Section 621A of the Companies Act, 1956.
2. Whether the present case is fit for compounding the alleged offence under Section 217(2AA) of the Companies Act, 1956.

Issue-wise Detailed Analysis:

1. Jurisdiction and Power of NCLT to Compound Offences:
The application was initially filed before the Company Law Board (CLB) and later transferred to the NCLT Hyderabad Bench. The applicants sought to compound the alleged offence under Section 217(2AA) of the Companies Act, 1956. The NCLT has full powers to compound offences attracting imprisonment or fine or both, even without referring to any Criminal Court or Special Courts. The Tribunal noted that under the new Companies Act, 2013, NCLT is empowered to compound offences leading to fine only under Section 441, which states that any offence punishable with fine only may be compounded by the Tribunal or Central Government. However, under the Companies Act, 1956, the powers of CLB were broader under Section 621A for compounding offences.

The Tribunal discussed two conflicting decisions on whether permission of the Court is necessary before compounding offences where prosecution has already been instituted. In Reliance Industries Ltd (1997) and Hoffland Finance Ltd (1997), different views were taken on the necessity of obtaining court permission. The Full Bench of CLB in Hoffland Finance Ltd held that the Company Law Board could compound offences without the need for court permission, even if prosecution was pending. This view was affirmed by the Delhi High Court in VLS Finance Ltd. vs Union of India and upheld by the Supreme Court.

2. Fit Case for Compounding the Alleged Offence:
The present case involved a violation of Section 217(2AA) of the Companies Act, 1956, where the company failed to comply with certain Accounting Standards. The applicants submitted that the offence was not intentional and did not harm public interest. The Registrar of Companies did not oppose the application for compounding. The Tribunal noted that this was the first offence committed by the company and that the new management had taken steps to prevent future defaults.

The Tribunal concluded that it had the jurisdiction and power to compound the offence under Section 621A of the Companies Act, 1956. It directed each applicant to pay Rs. 20,000 as compounding fees, the maximum penalty prescribed under Section 217(6) of the Companies Act, 1956, within three weeks. The Tribunal also directed the Registry to forward a certified copy of the order to the Chairman, SEBI, for appropriate action, as the applicant company is a listed company.

Conclusion:
The NCLT Hyderabad Bench allowed the application for compounding the offence under Section 217(2AA) of the Companies Act, 1956, subject to payment of compounding fees. The Tribunal confirmed its jurisdiction and power to compound such offences without requiring court permission, in line with established judicial precedents.

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