NCLT Mumbai Rules, No Bar On Compounding Offence U/S 441 Of Companies Act If Punishable With Fine Only
Pranav B Prem
The Mumbai Bench of the National Company Law Tribunal (NCLT), comprising Shri Ashish Kalia (Judicial Member) and Shri Sanjiv Dutt (Technical Member), has held that an offence punishable only with fine under the Companies Act, 2013 can be compounded under Section 441 of the Act. The Tribunal allowed a compounding application filed by Nvent Thermal India Private Limited and its director Mr. Ramesh Basavaraj Rotti for not convening Annual General Meetings (AGMs) within the prescribed time for the financial years 2015-16 and 2016-17.
Background
The compounding application was filed by the director and authorized representative of the company, seeking compounding of the default under Section 96 of the Act. It was found that the company had not held its AGMs for the relevant financial years within the time mandated by law. The delay in holding the AGMs was attributed to internal restructuring, delays in finalizing the company’s financials, and the implementation of new financial and operational systems.
The company submitted that its inability to convene AGMs was not with any mala fide intention and that the default did not cause any prejudice to the interest of stakeholders. It further submitted that the AGMs for the financial years 2015-16 and 2016-17 were eventually held on 09.02.2018 and 12.07.2018 respectively. Since then, the company has been complying with all statutory provisions.
Respondent’s Objections and Penalty Proposal
The Registrar of Companies (RoC), Mumbai, submitted that the default in holding AGMs for the years 2015-16 and 2016-17 continued for 496 and 284 days respectively. Accordingly, the RoC proposed penalties totaling ₹25.75 lakhs and ₹30.30 lakhs for each financial year against both the company and the director. It was further submitted that during the period of default, other directors of the company were also in office and their offences could not be compounded unless separate affidavits or applications were filed. The RoC acknowledged the petitioners' subsequent compliance and the company’s willingness to pay penalties on behalf of some former directors. It also confirmed that the offences committed were continuing in nature.
Tribunal's Findings
The Tribunal noted that under Section 99 of the Companies Act, the punishment for failing to convene an AGM is fine, and therefore, there is no legal bar on compounding such an offence under Section 441 of the Act. The Tribunal observed: “Since under Section 99 of the Act, punishment is only fine and in terms of Section 441 of the Act, if the punishment is only fine, then there is no legal impediment in compounding of this offence.”
It was also noted that the petitioner company had acknowledged its default and taken steps to rectify the same by holding the AGMs and filing the relevant financial statements.
Having regard to the facts and circumstances, the Tribunal fixed the compounding fees for both the company and its director Mr. Ramesh B. Rotti. For FY 2015-16 and 2016-17, a total compounding fee of ₹3,05,600/- was imposed on each. Additionally, the Tribunal imposed compounding fees of the same amount on three ex-directors who were also held liable for the default. No fee was imposed on another ex-director, Mr. Veeraiah Bellam Chowdary, as he was not a director during the relevant period. The Tribunal directed the company to inform the liable ex-directors to pay the prescribed fines and to remit the total compounding fee to the Pay and Accounts Officer, Ministry of Corporate Affairs, through Bharat Kosh within 30 days of receiving the order.
In conclusion, the NCLT allowed the compounding application, holding that there was no statutory bar in compounding offences punishable only with fine. The Tribunal emphasized that the compounding fee shall serve as a deterrent against repeated defaults and directed compliance with the order within the stipulated timeframe.
Appearance
Petitioner: Adv. Chandrakant R. Mhadeshwar
Respondent: A.K. Singh, Assist. RoC, Mumbai
Cause Title: Nvent Thermal India Private Limited V. Registrar Of Companies, Mumbai
Case No: Company Petition No. 7/MB/2025
Coram: Shri Ashish Kalia [Judicial Member], Shri Sanjiv Dutt [Technical Member]
