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Judgment
Subrata Kumar Dash, Member (Technical)
The instant CP is filed by Hemant Sahal, Hawa Singh Sahal, Moloy Kumar Bannerjee (herein after referred to as (“Applicant”) under Section 441 of the Companies Act, 2013 (Act) for compounding of offences read with Section 117, 403 and 450 of the Companies Act, 2013. The matter relates to Butterfly Innovations Private Limited (Applicant Company), a company incorporated under the Companies Act, 2013 and having its registered office at No.-378, Sector-10, Gurgaon, Haryana-122001. Therefore, the jurisdiction lies with this Bench of the Tribunal.
It is stated that the present authorised share capital of the applicant company is ₹5,00,000/- (Rupees Five Lakh) of ₹10/- each. The present issued, subscribed and paid-up share capital of the applicant company is ₹1,30,860/- (Rupees One Lakh Thirty Thousand and Eight Hundered and Sixty Only) divided into 13.086 equity shares of ₹10/- each.
It is submitted that the members of the Company in its Extra-Ordinary General Meeting held on 23 December 2015 passed resolutions for: (i) Issuance of Seed Series Compulsorily Convertible Preference Shares; and (ii) approval of conversion of loan raised by the Company. The true copy of resolutions is attached as Annexure C of the application.
It is further submitted that in accordance with provisions of section 117 read with section 403 of the Act, the Company was required to file Form MGT-14 within 300 days from the date of passing the said special resolution i.e. 17 October 2016. However, the same could not be filed within the due date. The Company tried to file the said form in the month of July 2017, but it was declined for the want of the Applicant Company has filed Form CG-1 for the purpose of the condonation of delay in filing the Form MGT-14 under the provisions of Section 460 of the Act. Resultantly, it was rejected due to the reason mentioned below
“Rejected due to the reason that inordinate delay or no proper justification or reason for each delay”
It is submitted that the company was functioning with very limited resources and minimal staff. The lapse in complying with the provisions of Section 117 read with Section 403 of the Act is unintentional. There was no benefit or undue gain achieved by the applicant by restraining the filing of Form MGT-14.
It is further submitted that Section 450 of the Act prescribes the penalty of Rs. 10,000/- with a further fine of Rs. 1,000/- for every day after the first date of default. Since there was a delay of 803 days in filing the e-form MGT-14, the total penalty for the offences committed under Section 117 of the Act is Rs. 8,13,000/-. The applicant have not previously applied for compounding of any non-compliance under Section 117 of the Act.
The relevant provisions of Section 117 of the Act in the Companies Act, 1956 is reiterated below:-
“117. (1) A copy of every resolution or any agreement, in respect of matters specified in sub-section (3) together with the explanatory statement under Section 102, if any, annexed to the notice calling the meeting in which the resolution is proposed, shall be filed with the Registrar within thirty days of the passing or making thereof in such manner and with such fees as may be prescribed 1:
Provided that the copy of every resolution which has the effect of altering the articles and the copy of every agreement referred to in sub-section (3) shall be embodied in or annexed to every copy of the articles issued after passing of the resolution or making of the agreement.
(2) If any company fails to file the resolution or the agreement under sub-section (1) before the expiry of the period specified therein, such company shall be liable to a penalty of ten thousand rupees and in case of continuing failure, with a further penalty of one hundred rupees for each day after the first during which such failure continues, subject to a maximum of two lakh rupees and every officer of the company who is in default including liquidator of the company, if any, shall be liable to a penalty of ten thousand rupees and in case of continuing failure, with a further penalty of one hundred rupees for each day after the first during which such failure continues, subject to a maximum of fifty thousand rupees.]]
(3) The provisions of this section shall apply to—
(a) special resolutions;
(b) resolutions which have been agreed to by all the members of a company, but which, if not so agreed to, would not have been effective for their purpose unless they had been passed as special resolutions;
(c) any resolution of the Board of Directors of a company or agreement executed by a company, relating to the appointment, re-appointment or renewal of the appointment, or variation of the terms of appointment, of a managing director;
(d) resolutions or agreements which have been agreed to by any class of members but which, if not so agreed to, would not have been effective for their purpose unless they had been passed by a specified majority or otherwise in some particular manner; and all resolutions or agreements which effectively bind such class of members though not agreed to by all those members;
(e) 4[***]
(f) resolutions requiring a company to be wound up voluntarily passed in pursuance of 5[section 59 of the Insolvency and Bankruptcy Code, 2016];
(g) resolutions passed in pursuance of sub-section (3) of section 179; 6[**]
7[Provided that no person shall be entitled under section 399 to inspect or obtain copies of such resolutions; 8[**]]
9[Provided further that nothing contained in this clause shall apply in respect of a resolution passed to grant loans, or give guarantee or provide security in respect of loans under clause (f) of sub-section (3) of section 179 in the ordinary course of its business by,—
(a) a banking company;
(b) any class of non-banking financial company registered under Chapter IIIB of the Reserve Bank of India Act, 1934, as may be prescribed in consultation with the Reserve Bank of India;
(c) any class of housing finance company registered under the National Housing Bank Act, 1987, as may be prescribed in consultation with the National Housing Bank; and]
(h) any other resolution or agreement as may be prescribed and placed in the public domain.
The provisions of Section 403 of the Companies Act, 2013 states that:
“403. (1) Any document, required to be submitted, filed, registered or recorded, or any fact or information required or authorised to be registered under this Act, shall be submitted, filed, registered or recorded within the time specified in the relevant provision on payment of such fee as may be prescribed:
1[Provided that where any document, fact or information required to be submitted, filed, registered or recorded, as the case may be, under section 92 or 137 is not submitted, filed, registered or recorded, as the case may be, within the period provided in those sections, without prejudice to any other legal action or liability under this Act, it may be submitted, filed, registered or recorded, as the case may be, after expiry of the period so provided in those sections, on payment of such additional fee as may be prescribed, which shall not be less than one hundred rupees per day and different amounts may be prescribed for different classes of companies:
Provided further that where the document, fact or information, as the case may be, in cases other than referred to in the first proviso, is not submitted, filed, registered or recorded, as the case may be, within the period provided in the relevant section, it may, without prejudice to any other legal action or liability under this Act, be submitted, filed, registered or recorded as the case may be, on payment of such additional fee as may be prescribed and different fees may be prescribed for different classes of companies:
2[Provided also that where there is default on two or more occasions in submitting, filing, registering or recording of such document, fact or information, as may be prescribed, it may, without prejudice to any other legal action or liability under this Act, be submitted, filed, registered or recorded, as the case may be, on payment of such higher additional fee, as may be prescribed.]]
3[(2) Where a company fails or commits any default to submit, file, register or record any document, fact or information under sub-section (1) before the expiry of the period specified in the relevant section, the company and the officers of the company who are in default, shall, without prejudice to the liability for the payment of fee and additional fee, be liable for the penalty or punishment provided under this Act for such failure or default.”
It is prayed that the offence under Section 117 of Companies Act, 2013 be compounded and a lenient view is taken, and reasonable compounding fee is levied.
Vide order dated 13.06.2019, the notice of the petition was issued to the Registrar of Companies, NCT of Delhi and Haryana and Income Tax Department. The report of Registrar of Companies dated 03.08.2021 was submitted by counsel for the petitioner vide Diary No. 00253/3 dated 22.02.2023 stating that If a company fails to file the resolution or the agreement under sub-section (1) before the expiry of the period specified under section 403 with additional fees, the company shall be punishable with fine which shall not be less than five lakh rupees but which may extend to twenty-five lakh rupees and every officer of the company who is in default, including liquidator of the company, it any, shall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees. It is further submitted that default has not been made good till date in respect of the filing of MGT-14. The report of the Income Tax Department was filed vide Diary No. 00253/3 dated 22.02.2023 stating that no demand is outstanding against the assessee-Petitioner Company.
We have heard and carefully considered the learned Senior Counsel for the petitioner company and perused the reports of the Registrar of Companies, NCT of Delhi and Haryana.
The provisions of Section 441 (1) and (2) of the Act (Prior to amendment) are as follows:-
“(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973, any offence punishable under this Act (whether committed by a company or any officer thereof) with fine only, may, either before or after the institution of any prosecution, be compounded by—
(a) the Tribunal; or
(b) where the maximum amount of fine which may be imposed for such offence does not exceed five lakh rupees, by the Regional Director or any officer authorised by the Central Government, on payment or credit, by the company or, as the case may be, the officer, to the Central Government of such sum as that Tribunal or the Regional Director or any officer authorized by the Central Government, as the case may be, may specify:
Provided that the sum so specified shall not, in any case, exceed the maximum amount of the fine which may be imposed for the offence so compounded:
Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under this sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 403 shall be taken into account:
Provided also that any offence covered under this sub-section by any company or its officer shall not be compounded if the investigation against such company has been initiated or is pending under this Act.
(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.”
As per the provisions of Section 441(1) of the Act, compounding can be made of any offence punishable under the Act (whether committed by a company or any officer thereof) not being an offence punishable with imprisonment only, or punishable with imprisonment and also with fine. Section 441(6) also reiterates that any offence which is punishable under the Act with imprisonment only or with imprisonment and also with a fine shall not be compounded.
In the present case, the default is for non-compliance of Section 117 of the Companies Act, 2013 and the penalty for the aforesaid default is provided in Section 450 of the Companies Act, 2013.
The third proviso to Section 441(1) of the Act provides for non-compounding of offence if the investigation against the company has been initiated or is pending under the Act. We have already discussed above that the report of the RoC has stated that there are no complaints and there is no inspection/investigation pending.
Similarly, it is stated by authorized representative of the petitioner company that no investigation is pending and no offence is committed within last three years as per Section 441(2) of the Act.
Although, it can be seen from the records of the petitioner company that the offence under Section 117 of the Act has not been made good. However, the petitioner company has attached the board resolution verifying the decision to submit Form MGT 14 which is attached as Annexure C of the main petition.
In the present case, the company has made an application suo motu and has stated that this or similar offences has not been compounded during the last three years. The total amount of penalty is ₹8,13,000/- for a period of 803 days in filing the e-form MGT-14. Taking into consideration the facts and circumstances of the present case and the discussion made above, we consider it just fair and reasonable to compound the offence under Section 117 of the Companies Act, 2013 in the case of Butterfly Innovations Private Limited on payment of a compounding fee of ₹5,00,000/- (Rupees Five Lakhs Only) by Applicant No. 1. Moreover, Applicant No. 2, 3 and 4 to pay a compounding fee of Rs. 50,000/- (Fifty Thousand Rupees Only) each. The petitioner Company shall file Form MGT 14 with the RoC within 30 days of this order.
The amount of the compounding fee be deposited with the ‘Pay and Accounts Officer’ Ministry of Corporate Affairs, New Delhi within a period of one month from the date of receipt of the certified copy of the order.
The Registrar of Companies, NCT of Delhi and Haryana will ensure that before effect is given to the above compounding order, the payment of the compounding fee is duly made by the applicants.
As a result thereof, CP No.80/Chd/Hry/2019 is allowed and disposed of.