Private complaint quashed as Companies Act amendments converted criminal penalties to civil penalties for non-filing violations

The Madras HC quashed a private complaint against petitioners for offences under Sections 92(5) and 137(3) of the Companies Act, 2013 relating to non-filing of annual returns and balance sheets. The court held that petitioners were entitled to benefit from the Companies Amendment Acts of 2019 and 2020, which modified penalties from criminal fines to civil penalties. The prosecution was transferred to the adjudicating authority under Section 454 of the Act for civil adjudication rather than criminal proceedings.

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Issues Involved:
1. Whether the private complaint for non-compliance with Sections 92(4) and 137(1) & (2) of the Companies Act, 2013 should be quashed.
2. Whether the amendments to the Companies Act, 2019 and 2020, which decriminalized certain offences, apply retrospectively to pending prosecutions.
3. Whether the payment of penalty and compounding fees absolves the petitioners from prosecution.
4. Whether the prosecution amounts to double jeopardy.

Issue-wise Detailed Analysis:

1. Quashing of Private Complaint:
The petitioners sought to quash the private complaint filed for non-compliance with Sections 92(4) and 137(1) & (2) of the Companies Act, 2013, arguing that they have subsequently filed the required annual returns and financial statements. The petitioners contended that the complaint should be quashed since the offences were decriminalized by the amendments to the Act in 2019, and the punishments were changed from fines to penalties, suggesting that the offences can no longer be tried by a Magistrate but must be adjudicated by the adjudicating authority under Section 454 of the Companies Act, 2013.

2. Retrospective Application of Amendments:
The court examined whether the amendments to the Companies Act, which reduced the punishment for certain offences, apply to pending prosecutions. The court referenced the Supreme Court judgment in T. Barai Vs Henry Ah Hoe, which held that when legislation reduces the punishment for an offence, the accused should benefit from the reduced punishment even if the offence occurred when a more severe punishment was in place. The court noted that the amendments aimed to reduce the rigour of punishments for technical and procedural lapses to promote ease of doing business and better corporate compliance. The court found that the amendments should apply to pending prosecutions, and the offences should be adjudicated by the adjudicating authority rather than being tried as criminal offences.

3. Payment of Penalty and Compounding Fees:
The respondent argued that the payment of penalties for delayed submissions does not absolve the petitioners from the offences. The respondent also stated that the petitioners had not paid the compounding fee and thus were not entitled to seek quashing of the complaint. The court, however, focused on the legislative intent behind the amendments, which was to treat such violations as technical and procedural, to be adjudicated in-house rather than through criminal prosecution.

4. Double Jeopardy:
The petitioners argued that the prosecution amounted to double jeopardy since they had already paid penalties. The court did not explicitly address the double jeopardy claim but emphasized the legislative changes that decriminalized the offences, thereby altering the nature of the proceedings from criminal to administrative adjudication.

Conclusion:
The court concluded that the amendments to the Companies Act, which changed the punishment from fines to penalties, should apply to pending prosecutions. The prosecution against the petitioners was transferred to the adjudicating authority appointed under Section 454 of the Companies Act for further proceedings. The court highlighted the legislative intent to ease doing business and reduce the number of prosecutions for technical and procedural lapses. The Criminal Original Petition was disposed of, and the connected Miscellaneous Petition was closed.

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