2020 (1) TMI 110 - Tri - Companies Law

Tribunal Orders 4,88,000 Compounding Fee for Companies Act Violation

The Tribunal imposed a compounding fee of Rs. 4,88,000 on the applicant for violating Section 165 of the Companies Act, 2013 by holding directorship in ... Appointment of Directors in contravention of provisions of law - Compounding for violation of provisions of section 165 of the Companies Act, 2013 - case of petitioner is that on August 1, 2018 he resigned as director from M/s. Yashoda Special Metals P. Ltd., and submitted his resignation to the company. With this resignation, he was director in 19 companies only. He was eligible to be appointed as director in one more company as provided under section 165 of the Companies Act, 2013 - According to the applicant, M/s. Yashoda Special Metals P. Ltd., failed to file Form DIR-12 with the Registrar of Companies, Hyderabad informing the resignation of the petitioner as director. HELD THAT:- In this case, there is no dispute that Form DIR-12 was filed on April 13, 2019. However, Form MGT-7 was also filed beyond the date of filing Form DIR-12. The company should have informed Registrar of Companies by filing Form DIR-12 on or before September 1, 2018. So, the delay to be calculated from September 1, 2018. Because time was available for the company to file Form DIR-12 on or before September 1, 2018. So, delay to be calculated from September 1, 2018 but not from August 6, 2018 the date on which petitioner became director in M/s. Wanton Builders P. Ltd. So, the period from August 6, 2018 to August 31, 2018 is to be excluded and delay to be calculated from September 1, 2018 to April 12, 2019 exclusively the date on which Form DIR-12 was filed. The applicant is seeking compounding of violation of provisions of section 165 of the Companies Act, 2013. The Registrar of Companies, Hyderabad calculated fine basing on the minimum prescribed under section 165(6) of the Companies Act, 2013 - since no prosecution is launched against applicant and the present application is filed for compounding of the violation on his own. Therefore, the Tribunal can take a lenient view in imposing compounding fee of ₹ 2,000 per day which is just and reasonable in the circumstances of the case. As the compounding fee has been remitted by the applicant, the offence stated in the application is compounded. Issues Involved:1. Violation of Section 165 of the Companies Act, 2013.2. Compounding of the violation under Section 441 of the Companies Act, 2013.3. Calculation of the compounding fee and the period of violation.4. Non-filing of Form DIR-12 by Yashoda Special Metals P. Ltd.Issue-wise Detailed Analysis:1. Violation of Section 165 of the Companies Act, 2013:The applicant was a director in 27 companies as of March 31, 2014, exceeding the limit prescribed under Section 165 of the Companies Act, 2013, which restricts a person from holding directorship in more than 20 companies. The applicant was required to resign from at least seven companies within one year from the commencement of Section 165, i.e., by March 31, 2015. The applicant complied by resigning from eight companies on March 31, 2015, bringing the total number of directorships to 19, within the prescribed limit.2. Compounding of the Violation under Section 441 of the Companies Act, 2013:The applicant sought compounding for the violation of Section 165. The Registrar of Companies, Hyderabad, reported that the applicant was in violation of Section 165(3) as he was a director in more than 20 companies after the commencement of the Act. The applicant contended that the delay in compliance was due to Yashoda Special Metals P. Ltd. not filing Form DIR-12 to notify his resignation. The Tribunal considered the applicant's request for compounding the offence, noting that no prosecution was launched against him and the application was filed voluntarily.3. Calculation of the Compounding Fee and the Period of Violation:The period of violation was calculated from September 1, 2018, to April 12, 2019, as the company had time until September 1, 2018, to file Form DIR-12. The Tribunal decided to impose a compounding fee of Rs. 2,000 per day for 244 days, totaling Rs. 4,88,000. This decision was based on the precedent set by the National Company Law Tribunal, New Delhi, which imposed fines lesser than the minimum in similar cases.4. Non-filing of Form DIR-12 by Yashoda Special Metals P. Ltd.:The applicant resigned from Yashoda Special Metals P. Ltd. on August 1, 2018, but the company failed to file Form DIR-12 to notify the Registrar of Companies, Hyderabad. Consequently, the applicant was shown as a director in 21 companies, leading to his disqualification under Section 164. The applicant argued that the non-filing of Form DIR-12 was not his fault and that he had submitted his resignation in good faith. The Tribunal acknowledged this and noted that the delay in filing Form DIR-12 was not willful or wanton.Conclusion:The Tribunal compounded the offence by imposing a fee of Rs. 4,88,000, which the applicant paid. The order was sent to the Registrar of Companies, Hyderabad, for appropriate action. The Tribunal took a lenient view considering the circumstances and the applicant's voluntary compliance.