Hilden Packaging Machines Private Limited vs Registrar Of Companies, Mumbai, Maharashtra Vs

IA No. 5395/2023:- Applicants/Defaulters Herein:

Hilden Packaging Machines Private Limited – Company.

Mr. Ratanchand Jivraj Oswal, Managing Director.

Mr. Rishi Ratanchand Oswal - Director.

Mrs. Rasila Ratanchand Oswal - Director.

Mrs. Madhulika Rishi Oswal- Director.

Mr. George Everard Fonseca- Director.

Section Violated:

Section 134(3)(o) read with Section 135 of the Companies Act, 2013.

Penalty Provided Under:

Section 134(8) of the Companies Act, 1956.

This Compounding Application is filed by the Applicant under Section 441 of the Companies Act, 2013, for compounding of the offence committed under Section 134(3)(o) read with Section 135 of the Companies Act, 2013 (hereinafter referred to as “the Act”) wherein it was found that the Applicant Company and its Directors have failed to disclose the details of the Corporate Social Responsibility (‘CSR’) policy in the Board’s Report for FY 2014-15, thereby committing an offence punishable u/s 134(8) of the Companies Act, 2013.

The Applicant Company was incorporated on 15.01.1983. The Authorized Share Capital of Rs. 50,00,000/- divided into 50,000 Equity shares of Rs. 100/- each. The Issued, Subscribed and Paid up Share Capital is Rs. 4,01,000/- divided into 4010 equity shares of Rs. 100/- each.

The copy of the Annual Reports for the financial year ended 31.03.2014 to 31.03.2017 are annexed to the petition. The Company has also filed its accounts and annual returns as on 31.03.2023. Thus, the Company is regular in filing its Annual Accounts with the Registrar of Companies (RoC) till date.

The main objects of the Applicant Company are: -

a. To takeover as going concern business of Messrs. Hilden & Company with all its assets and liabilities including goodwill pursuant to an agreement entered into and on take over, the firm shall stand dissolved;

AND

b. To carry on the business in India and elsewhere as manufacturers, exporters, importers, distributors, dealers in all types of Machines, Packaging Machines, Bottling Machines and to fabricate steel and alloy steel products.

The Applicant/Defaulters herein have filed Form GNL-1 vide SRN No. G83863522 on 17.04.2018 thereby admitting the violation of 134(3)(o) read with Section 135 of the Companies Act, 2013.

The RoC, Mumbai issued a Show Cause Notice bearing No. ROC/JP(JTA)/CSR/727/134/2017/10458 dated 04.12.2017 to the Company and its Directors for violation of Section 134(3)(o) read with Section 135 of the Companies Act, 2013.

The RoC, Mumbai filed a complaint against the Applicant Company and its officers in default before the Hon’ble Sessions Court, Greater Bombay u/s 134(8) of the Act.

The Applicant/defaulters admit their default and submits that for the Financial Year 2014-15, the Company has undertaken mandatory Corporate Social Responsibility. However, only the disclosure of the same was not made in the Board Report for the FY 2014-15. The Applicant submits that this omission was technical in nature and it was inadvertently committed due to oversight. Therefore, the said default was unintentional and there is an absence of mens rea. The Applicant states that the offence committed is a first-time offence.

The RoC Mumbai have filed their report/comments. According to the RoC report, the Company and its Directors are found to have violated the provisions of Section 134(3)(o) r.w. Section 135 of the Companies Act, 2013. The RoC report further states that the Company has made good its default in complying with Section 134(3)(o) r.w. Section 135 of the Companies Act, 2013 by making necessary disclosures in the Board Report for the FY 2015-16. The said offence is to be compounded by imposing fine under Section 134(8) of the Companies Act, 2013 where the amount of fine to be imposed on the company shall not be less than fifty thousand rupees but which may extend to twenty-five lakh rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to 3 years or with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees, or with both. Hence, in view of the provisions contained in Section 441, sub-section (1) read with sub-section (6), the offence is compoundable.

This Bench has gone through the pleadings on record and the submissions made by the Representative for the Applicants / Defaulters herein and is accordingly of the considered view that, the Applicants/Defaulters herein have violated the provisions of Section 134(3)(o) r.w. Section 135 of the Companies Act, 2013 and for the said violation, the punishment is provided u/s 134(8) of the Companies Act, 2013. The extracts of the Sections which are relevant in this case are as follows:

Section 134(3)(o): -

Sec.134(3)- There shall be attached to statements laid before a company in general meeting, a report by its Board of Directors, which shall include- (o) the details about the policy developed and implemented by the company on corporate social responsibility initiatives taken during the year;

Section 134(8) Penalty (As stood before the Companies (Amendment) Act, 2020

“134(8)- If a Company contravenes the provisions of this section, the company shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to twenty-five lakh rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to three years or with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees, or with both.”

Hence, the penalty for the defaulters for the default occurred in the year 2014-15 is: -

Serial No.

Name of the Offender

Fine (in INR)

1.

Hilden Packaging Machines Private Limited

Minimum- Rs. 50,000/-

Maximum- Rs. 25,00,000/-

2.

Mr. Ratanchand Jivraj Oswal

Minimum- Rs. 50,000/-

Maximum- Rs. 5,00,000/-

3.

Mr. Rishi Ratanchand Oswal

Minimum- Rs. 50,000/-

Maximum- Rs. 5,00,000/-

4.

Mrs. Rasila Ratanchand Oswal

Minimum- Rs. 50,000/-

Maximum- Rs. 5,00,000/-

5.

Mrs. Madhulika Rishi Oswal

Minimum- Rs. 50,000/-

Maximum- Rs. 5,00,000/-

6.

Mr. George Everard Fonseca

Minimum- Rs. 50,000/-

Maximum- Rs. 5,00,000/-

Further, as to the issue with regards to restriction on the power of the ‘Regional Director’ and the ‘authorized officers of the Central Government’ permitting to compound the offences wherein the maximum amount of fine does not exceed Rupees Twenty-Five Lakhs, Hon’ble NCLAT in the matter of “Magnon Solutions Pvt. Ltd & Ors. V/s Registrar of Companies” vide Judgment dated 27th September, 2018 in Company Appeal (AT) No. 116 of 2018 has held at Para 11 of the Judgment that the Tribunal has the powers to compound all the offences irrespective of any pecuniary limit as evident from a bare perusal of Section 441 of the Companies Act, 2013. The aforesaid provision makes it clear that Section 441 only puts a restriction on the power of the ‘Regional Director’ and ‘the authorised officers of the Central Government’ permitting them to compound the offences wherein the maximum amount of fine does not exceed five lakh rupees {now upto twenty-five lakhs rupees by virtue of the Companies (Amendment) Act, 2019} and is punishable with ‘fine only’. No such fetter has been put on powers of the Tribunal, which is the main forum for such compounding of offences, the other forum of ‘Regional Director’ and ‘Officer of the Central Government’ being alternative but restricted by extent of quantum of punishment. Hence, the offences stated in the present Petition can be compounded by the Tribunal.

Section 134(8) of the Companies Act, 2013  as amended by the Companies (Amendment) Act, 2020 w.e.f. 21st December, 2020 has reduced the penalties and fines for the violation or breach of the provisions of Section 134. The amended Section 134(8) is reproduced hereunder:

“(8) If a company is in default in complying with the provisions of this section, the company shall be liable to a penalty of three lakh rupees and every officer of the company who is in default shall be liable to a penalty of fifty thousand rupees.”

Thus, it is seen that the legislature has reduced the penalties on the Company as well as its officers for the breach of the provisions of Section 134 of the Act.

On examination of the circumstances and the legislative intent, as discussed above, this Tribunal is of the view that a Compounding Fee of INR 5,00,000/- (Rupees Five Lakhs Only) by the Applicant Company and a fee of INR 1,00,000/- each by the five Directors named hereinabove, thus, the Compounding Fee totalling to INR 10,00,000/- (Rupees Ten Lakhs Only) shall be sufficient as a deterrent for not repeating the alleged and admitted default in future. The imposed remittance shall be paid by way of Demand Draft drawn in favour of “Pay and Accounts Officer, Ministry of Corporate Affairs, Mumbai” within 30 days from the receipt of this order.

This Compounding Application vide Company Petition No. 258/441/NCLT/MB/MAH/2022 is, therefore, disposed of on the terms directed above. Needless to mention, the offence shall stand compounded subject to the remittance of the Compounding Fee imposed. A compliance report, therefore, shall be placed on record.

Registry shall send a copy of this order to the Registrar of Companies, Mumbai, Maharashtra.

Ordered accordingly. File be consigned to Records.