Section 441 of the Companies Act, 2013 ("the Act") permits the compounding of certain offences. The compounding is a settlement between the offender and the authority, and it results in the termination of the proceedings. The provision is designed to reduce the burden on the courts and to allow companies to regularise their compliance without the stigma of a conviction.
The Offences That Can Be Compounded
Offences punishable only with a fine are generally compoundable. Offences punishable with imprisonment, or with both imprisonment and a fine, may be compounded with the permission of the Special Court. Offences that have been compounded within the preceding three years cannot be compounded again.
The Procedure
The application for compounding is made to the Regional Director, the NCLT, or the Special Court, depending on the nature of the offence and the amount of the fine. The NCLT Mumbai has held that Section 441 imposes pecuniary limits only on the powers of the Regional Director and the authorised officers, not on the Tribunal, and that the Tribunal can compound an offence regardless of the amount of the fine.
The Effect
The compounding order terminates the proceedings and discharges the offender. The offender must pay the compounding amount, and the offence is treated as having been compounded. The compounding does not affect the civil liability of the company or its officers.
Call to Action
Anuj Desai & Associates advises companies on the compounding of offences—from the identification of the compoundable offences and the application to the compounding order. If your company has pending offences, we can help you evaluate the compounding option.
📧 office@anujdesaiassociates.com
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