Companies Act Section 441 — Compounding of certain offences
CHAPTER XXVIII SPECIAL COURTS
Commercial / Corporate
Summary
Sub-section (1) allows certain offences under this Act to be compounded, meaning settled by paying a sum of money instead of going through a full prosecution. This applies to offences that are not punishable with imprisonment only, or with imprisonment and also a fine. The compounding can happen either before or after a prosecution has been started, and can be done by the Tribunal, or, if the maximum fine for the offence does not exceed twenty-five lakh rupees, by the Regional Director or an officer authorised by the Central Government. The company or officer must pay or credit the specified sum to the Central Government. The sum specified cannot exceed the maximum fine that could be imposed for the offence. Any additional fee already paid under sub-section (2) of section 403 must be taken into account when specifying the sum. However, an offence cannot be compounded if an investigation against the company has already been initiated or is pending under this Act.
Sub-section (2) states that the provision in sub-section (1) does not apply to an offence committed by a company or its officer within three years from the date on which a similar offence was previously compounded under this section.
The Explanation clarifies two things. Under clause (a), any second or subsequent offence committed after the expiry of three years from the date of the previous compounding is treated as a first offence. Under clause (b), a Regional Director means a person appointed by the Central Government as a Regional Director for the purposes of this Act.
Under clause (a) of sub-section (3), every application for compounding an offence must be made to the Registrar, who then forwards it, along with the Registrar's comments, to the Tribunal, the Regional Director, or the authorised officer, as applicable.
Under clause (b) of sub-section (3), when an offence is compounded, whether before or after a prosecution is started, the company must give intimation of this to the Registrar within seven days from the date of compounding.
Under clause (c) of sub-section (3), if an offence is compounded before any prosecution is instituted, no prosecution can be started for that offence, whether by the Registrar, any shareholder of the company, or any person authorised by the Central Government, against the offender for whom the offence was compounded.
Under clause (d) of sub-section (3), if compounding happens after a prosecution has been instituted, the Registrar must bring this to the notice of the court in writing. Once the court is notified of the compounding, the company or its officer for whom the offence was compounded shall be discharged.
Sub-section (4) allows the Tribunal, the Regional Director, or the authorised officer, when dealing with a proposal to compound an offence involving a default in filing or registering any return, account, or other document with the Registrar, to direct by order any officer or other employee of the company to file or register such document within a specified time, on payment of the fee and additional fee required under section 403.
Sub-section (5) states that if any officer or other employee of the company fails to comply with an order made under sub-section (4), the maximum amount of fine for the offence proposed to be compounded shall be twice the amount provided in the corresponding section where punishment for that offence is specified.
Sub-section (6) provides that, notwithstanding anything in the Code of Criminal Procedure, 1973, any offence punishable under this Act with imprisonment only, or with imprisonment and also a fine, shall not be compoundable.
Sub-section (7) states that no offence specified in this section shall be compounded except under and in accordance with the provisions of this section.
Official Text
(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), any offence punishable under this Act (whether committed by a company or any officer thereof) 4[not being an offence punishable with imprisonment only, or punishable with imprisonment and also with fine], 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 5[does not exceed twenty-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 authorised 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.
(3)
(a) Every application for the compounding of an offence shall be made to the Registrar who shall forward the same, together with his comments thereon, to the Tribunal or the Regional Director or any officer authorised by the Central Government, as the case may be.
(b) Where any offence is compounded under this section, whether before or after the institution of any prosecution, an intimation thereof shall be given by the company to the Registrar within seven days from the date on which the offence is so compounded.
(c) Where any offence is compounded before the institution of any prosecution, no prosecution shall be instituted in relation to such offence, either by the Registrar or by any share holder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.
(d) Where the compounding of any offence is made after the institution of any prosecution, such compounding shall be brought by the Registrar in writing, to the notice of the court in which the prosecution is pending and on such notice of the compounding of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.
(4) The Tribunal or the Regional Director or any officer authorised by the Central Government, as the case may be, while dealing with a proposal for the compounding of an offence for a default in compliance with any provision of this Act which requires a company or its officer to file or register with, or deliver or send to, the Registrar any return, account or other document, may direct, by an order, if it or he thinks fit to do so, any officer or other employee of the company to file or register with, or on payment of the fee, and the additional fee, required to be paid under section 403, such return, account or other document within such time as may be specified in the order. 1[
(5) If any officer or other employee of the company who fails to comply with any order made by the Tribunal or the Regional Director or any officer authorised by the Central Government under sub-section (4), the maximum amount of fine for the offence proposed to be compounded under this section shall be twice the amount provided in the corresponding section in which punishment for such offence is provided.] 2[
(6) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.]
(7) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.