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TaxTMI 
TaxTMI 
TaxTMI 
1997 (5) TMI 435
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....ing was pending. Accordingly, the applicants were directed to obtain permission of the concerned criminal court and pursuant to the said direction the applicants moved an application before the Additional Chief Metropolitan Magistrate, Delhi, for permission to compound the offence. It appears that the learned Magistrate, while hearing the said application made an order that the jurisdiction of the court comes into operation only after the parties had compounded the offence. It was also observed by the learned Magistrate that the court could not issue any direction to any of the parties to compound the offence. The application made before the learned Magistrate was therefore rejected. 2. The learned Member of the Company Law Board felt that this situation raised an important legal issue with regard to the question whether a compounding order under Section 621A of the Act could be passed without first obtaining the permission of the trial court. The Western Region Bench of the Company Law Board in the case of Reliance Industries Ltd., In re [1997] 89 Comp Cas 67 had observed that the question of seeking permission of the court would arise only after compounding is done by the Compan....
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....tion of compounding the offence with or without any prior permission of the criminal court if any prosecution relating to the offence committed is already pending before the criminal court. 6. There are various sections in the Companies Act which provide for penal action by way of prosecution in case of violation of the provisions of those sections. Five types of penalties have been provided in the Companies Act. They are : (1) fine only, (2) imprisonment or fine, (3) imprisonment or fine or with both, (4) imprisonment and fine, (5) imprisonment only. Before Section 621A was inserted by the Companies (Amendment) Act, 1988 (this section came into effect on May 31, 1991), as per Section 621, all offences against the Act were required to be tried by the court, on the complaint of the Registrar or a shareholder of the company or a person authorised by the Central Government in that behalf. Section 621A was inserted on the recommendations of the Sachar Committee, which, after examining the position obtaining then with regard to launching of prosecution for violation of the provisions of the Act, suggested substitution of the existing provisions for realisation of fines through court pr....
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....under the sub-section, the sum, if any, paid by way of additional fee under Sub-section (2) of Section 611 shall be taken into account. (2) Nothing in Sub-section (1) shall apply to an offence committed by a company or its officer within a period of three years from the date on which a similar offence committed by it or him was compounded under this section. Explanation.--For the purposes of this section,-- (a) any second or subsequent offence committed after the expiry of a period of three years from the date on which the offence was previously compounded, shall be deemed to be a first offence ; (b) "regional director" means a person appointed by the Central Government as a regional director for the purposes of this Act. (3) Every regional director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board. (4) (a) Every application for the compounding of an offence shall be made to the Registrar who shall forward the same, together with his comments thereon, to the Company Law Board or the regional director, as the case may be. (b) Where any offence is compounded under this section, whether ....
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....pt under and in accordance with the provisions of this section." 9. It appears from the above section that the Company Law Board or the Regional Director, as the case may be, may compound any offence punishable under this Act, not being an offence punishable with imprisonment only or with imprisonment and also with fine as has been contemplated under Sub-section (1) of Section 621A of the Act. However, in view of Section 621A(1)(b) the Regional Director can compound only offences punishable with a maximum fine of ₹ 5,000. Sub-section (4)(a) to (4)(d) of Section 621A of the Act, inter alia, provide that every application for the compounding of an offence shall be made to the Registrar, who shall forward the same together with his comments thereon to the Company Law Board or the Regional Director, as the case may be. Where any offence compounded under this section, namely, Section 621A of the Act, whether before or after the institution of any prosecution, an intimation thereof shall be given by the company to the Registrar within seven days from the date on which the offence was so compounded. Where any offence is compounded before any institution of any prosecution, no ....
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.... by a company or any officer thereof, not being an offence punishable with imprisonment only, or with imprisonment and also with fine. It also appears to us that an elaborate procedure has been laid down for compounding such offences under Sub-sections (1) to (6) of Section 621A of the Act. It is nowhere indicated in any of the provisions as contained in Section 621A, Sub-sections (1) to (6) that the Company Law Board or Regional Director while compounding the offences punishable under the Act is required or obliged to insist on obtaining prior permission or any permission of the criminal court where any such prosecution is pending. There is no such expression "with the permission of the court" in Sub-section (1) of Section 621A or any of the Sub-sections (2) to (6) of Section 621A of the Act. 12. Now, let us come to Sub-section (7) of Section 621A of the Act. We find that this sub-section also starts with a non-obstante clause. Here, under Sub-section (7)(a) of Section 621A it is provided that any offence which is punishable under the Act, the Companies Act, 1956, with imprisonment or with fine or with both shall be compoundable "with the permission of the court&qu....
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.... permission to compound and while doing so it simultaneously decides the quantum of composition fee also subject to the limits as fixed in Sub-section (1). In case the Company Law Board decides against composition, it is nothing but refusal to grant permission. Thus, the view that further permission as per Sub-section (7) from the court is necessary, does not seem to be correct. Such interpretation would also result in irreconcilable jurisdictional problems. The Company Law Board is a quasi-judicial body exercising powers conferred on it by various statutes. Appeals against its orders lie only to the High Court. If, in a case where the Company Law Board has exercised its discretion to compound an offence punishable with fine or imprisonment or with both, and on an application for permission, the court refuses to accord permission, then it would mean that the court is sitting in judgment over the decision of the Company Law Board. In the same way, if prior permission is applied for and the court grants the same, even then, the Company Law Board, at its discretion may not compound the offence, as the permission granted by the court is not binding on the Company Law Board. If the inte....
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....compounding the procedure laid down in the Criminal Procedure Code has to be followed in this regard. It thus appears that the parties may be allowed to compromise a compoundable case before the criminal court where the prosecution is pending and such compounding of offence should be according to the procedure laid down in the Code of Criminal Procedure. Therefore, it seems that when it is an offence under this Act punishable with imprisonment or fine or with both it shall be compoundable with the permission of the court in accordance with the procedure laid down in that Act, the Code of Criminal Procedure, for compounding of offences. Thus, such compounding of offences is entirely in the arena of the criminal court in which the prosecution is pending and such compounding of offences would be done in accordance with the procedure laid down in the Code of Criminal Procedure. It is also an option left with the concerned party to have the offence compounded by the Company Law Board in accordance with the procedure laid down in Section 621A of the Companies Act and in this case, in our view, no prior permission from the criminal court where the prosecution is pending is necessary. Sub-....