Compounding of Companies Act offences denied where defaults involved fabrication, falsified accounts, and pending criminal prosecutions.

Compounding of Companies Act offences is limited to inadvertent, bona fide statutory lapses and is inappropriate where the defaults involve deliberate and mala fide non-compliance. On the stated facts, the misconduct included fabrication of documents, falsification of books of account and financial statements, and acceptance of deposits contrary to the statutory framework. Because the defaults were described as incurable and closely connected with pending criminal prosecutions under penal law, compounding would prejudice the prosecution. The requests for compounding were therefore declined, and the applicant was held not entitled to compounding of the offences.

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Issues: Whether the offences under the Companies Act could be compounded in view of the nature of the defaults and the pendency of related criminal prosecutions.

Analysis: Compounding is intended to relieve inadvertent and bona fide statutory lapses, not deliberate and mala fide non-compliance. The facts disclosed large-scale fabrication of documents, falsification of books of account and financial statements, and acceptance of deposits in violation of the statutory framework. The defaults were found to be incurable and intrinsically linked to pending criminal prosecutions under the penal law. In such circumstances, compounding would prejudice the prosecution and would not be appropriate.

Conclusion: The requests for compounding were rightly declined and the applicant was held not entitled to compounding of the offences.

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