2023 (6) TMI 71 - AT - Companies Law

Appellant's Appeal Dismissed: Fine Imposed for Companies Act Non-Compliance

The appellant's appeal under Section 421 of the Companies Act against an order by the NCLT, New Delhi, compounding offences under Section 441 of the ... Compounding of offences under Section 441 - officer in default - liability for failure to hold annual general meeting - reduction of fine to one fifth of maximum on compoundingCompounding of offences under Section 441 - officer in default - liability for failure to hold annual general meeting - reduction of fine to one fifth of maximum on compounding - Validity of NCLT order compounding the offence and imposing 1/5th of the maximum fine on the appellant (an alternate director) who had admitted default. - HELD THAT: - The appellant was a joint applicant before the NCLT and had admitted default for the specified periods, accepting exposure as an officer in default for 2,905 days. The joint compounding application under Section 441 was allowed by the NCLT after perusal of the ROC report, which computed the maximum payable on the admitted defaults. The NCLT exercised its compounding power and, consistently for all seven applicants, reduced the maximum fine to one fifth and imposed that reduced amount on the appellant. Given the appellant's admission of default and his participation in the joint compounding application, there was no legal error in the Tribunal allowing compounding and reducing the penalty. The Appellate Tribunal found no infirmity in the NCLT's exercise of discretion or in the quantum fixed on compounding and declined to interfere.Appeal dismissed; NCLT order compounding the offence and imposing fine at one fifth of maximum upheld; no costs.Final Conclusion: The appeal challenging the NCLT's order allowing the joint compounding application and reducing the penalty to one fifth of the maximum is dismissed: the appellant had admitted default as an officer in default, the NCLT acted within its compounding discretion and there is no grounds for interference. Issues Involved:1. Compounding of offences under Section 441 of the Companies Act, 2013.2. Imposition of fine for non-compliance with Section 166/96 of the Companies Act, 1956/2013.3. Appellant's argument against the imposed fine.Summary:Compounding of Offences:The appeal was filed under Section 421 of the Companies Act against an order by the NCLT, New Delhi, which compounded offences under Section 441 of the Companies Act, 2013. The NCLT directed the appellant to pay a fine of Rs. 26,53,000/- for non-compliance with Section 166/96 of the Companies Act, 1956/2013. The joint application for compounding was filed by seven applicants, including the company.Imposition of Fine:The appellant, along with the company and five others, admitted guilt under Section 96/99 of the Act. The NCLT, after examining the ROC's detailed report on defaults for various financial years, imposed fines based on the number of default days. The maximum fine calculated was Rs. 1,32,65,000/-, but the NCLT reduced it to 1/5th, imposing a fine of Rs. 26,53,000/- on the appellant.Appellant's Argument:The appellant argued that the NCLT erred in imposing the fine and incorrectly relied on a previous judgment. The appellant, being an Alternate Director, contended that he should not have been fined. The counsel for the ROC opposed the appeal, stating no apparent error in the NCLT's order.Judgment:The Tribunal found no merit in the appeal, emphasizing that the appellant admitted the default and sought compounding. The NCLT had already reduced the fine significantly. The appeal was dismissed without any cost imposed.