The Compounding Mechanism
Section 441 permits the compounding of certain offences under the Companies Act. The offence may be compounded by the authority before which the prosecution is pending, or by the Regional Director or the NCLT depending on the maximum fine. The compounding fee is determined by the authority and cannot exceed the maximum fine leviable for the offence.
The Fee Determination
The compounding fee is not a fixed amount. The authority considers the nature of the default, the duration, the cooperation of the company, and any corrective steps taken. The additional fee paid under Section 403 is taken into account in determining the compounding fee.
The Application and Filing
The compounding application is filed with the ROC in Form GNL-1, accompanied by the prescribed fee and the supporting documents. The application should set out the offence, the period of default, the corrective action, and the proposed compounding amount. A bare application without the corrective action plan is weak.
The NCLT Route
Where the offence is compoundable by the NCLT, the application is made to the Tribunal. The NCLT has taken the view that there is no bar on compounding an offence punishable with fine only, and it has reduced compounding fees from the maximum computed by the ROC in appropriate cases. The NCLT route is often used for higher-value or contested compounding.
Documentation
The file should contain: the show-cause notice; the reply; the compounding application; the corrective action evidence; the fee computation; the compounding order; and the payment challan. A company that has compounded the offence should place the order before the board and disclose it where required.
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