V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment

Judgment:

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
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		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
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			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
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	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
)
$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '702632',
	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
)
$url = 'https://sooperkanoon.com/case/amp/702632/v-l-s-finance-ltd-vs-union-india'
$ctype = ' High Court'
$content = array(
	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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Dr. Mukundakam Sharma, J.

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the Companies Act, 1956. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the Companies Act, 1956. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence.

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$dataForView = array(
	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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i) Whether the present appeal is maintainable?

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by -

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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(a) the Company Law Board; or

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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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:

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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(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 compound under this section.

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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(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;

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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(3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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(4) (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 Company Law Board or the Regional Director, as the case may be.

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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(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.

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), -

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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(a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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(8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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i) Offences punishable with fine only.

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$dataForView = array(
	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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ii) Offences punishable with imprisonment only.

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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iii) Offences punishable with fine and imprisonment.

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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iv) Offences punishable with fine or imprisonment.

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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v) Offences punishable with fine or imprisonment or both

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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Issue No. (i)

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable.

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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Issue No. (ii)

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences.

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.'

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter.

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence.

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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Issue No. (iii)

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
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20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.

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	'title_for_layout' => 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | ',
	'desc' => array(
		'Judgement' => array(
			'id' => '702632',
			'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
			'appealno' => 'Company Appeal (B) No. 1/2001',
			'appellant' => 'V.L.S. Finance Ltd.',
			'authreffered' => '',
			'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
			'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
			'caseanalysis' => null,
			'casesref' => '',
			'citingcases' => '',
			'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
			'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
			'court' => 'Delhi',
			'court_type' => 'HC',
			'decidedon' => '2003-11-05',
			'deposition' => 'Appeal dismissed',
			'favorof' => null,
			'findings' => null,
			'judge' => ' Mukundakam Sharma, J.',
			'judgement' => '<p style="text-align: justify;">Dr. Mukundakam Sharma, J.</p><p style="text-align: justify;">1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p style="text-align: justify;">2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p style="text-align: justify;">'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p style="text-align: justify;">3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p style="text-align: justify;">4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p style="text-align: justify;">5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p style="text-align: justify;">i) Whether the present appeal is maintainable?</p><p style="text-align: justify;">ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p style="text-align: justify;">iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p style="text-align: justify;">6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p style="text-align: justify;">Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p style="text-align: justify;"> (a) the Company Law Board; or</p><p style="text-align: justify;">(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p style="text-align: justify;"> 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:</p><p style="text-align: justify;">Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p style="text-align: justify;"> (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 compound under this section.</p><p style="text-align: justify;">Explanation: For the purpose of this section. - </p><p style="text-align: justify;"> (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;</p><p style="text-align: justify;">(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p style="text-align: justify;"> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p style="text-align: justify;">(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p style="text-align: justify;">(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.</p><p style="text-align: justify;">(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p style="text-align: justify;">(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p style="text-align: justify;">(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p style="text-align: justify;">(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p style="text-align: justify;">(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p style="text-align: justify;"> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p style="text-align: justify;">(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p style="text-align: justify;"> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p style="text-align: justify;"> .................</p><p style="text-align: justify;"> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p style="text-align: justify;">7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p style="text-align: justify;">8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p style="text-align: justify;">i) Offences punishable with fine only.</p><p style="text-align: justify;">ii) Offences punishable with imprisonment only.</p><p style="text-align: justify;">iii) Offences punishable with fine and imprisonment.</p><p style="text-align: justify;">iv) Offences punishable with fine or imprisonment.</p><p style="text-align: justify;">v) Offences punishable with fine or imprisonment or both</p><p style="text-align: justify;">9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p style="text-align: justify;">Issue No. (i)</p><p style="text-align: justify;">10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p style="text-align: justify;">Issue No. (ii)</p><p style="text-align: justify;">11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p style="text-align: justify;">12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p style="text-align: justify;">13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p style="text-align: justify;">'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p style="text-align: justify;">Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p style="text-align: justify;">14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p style="text-align: justify;">15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p style="text-align: justify;">16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p style="text-align: justify;">17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p style="text-align: justify;">18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p style="text-align: justify;">Issue No. (iii)</p><p style="text-align: justify;">19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p style="text-align: justify;">20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
			'ratiodecidendi' => '',
			'respondent' => 'Union of India (Uoi) and ors.',
			'sub' => 'Company',
			'link' => null,
			'circuit' => null
		)
	),
	'casename_url' => 'v-l-s-finance-ltd-vs-union-india',
	'args' => array(
		(int) 0 => '702632',
		(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
	)
)
$title_for_layout = 'V L S Finance Ltd Vs Union of India Uoi and ors - Citation 702632 - Court Judgment | '
$desc = array(
	'Judgement' => array(
		'id' => '702632',
		'acts' => '<a href="/act/51006/companies-act-1956-complete-act">Companies Act, 1956</a> - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); <a href="/act/50902/code-of-criminal-procedure-1973-complete-act">Code of Criminal Procedure (CrPC) , 1973</a>; Companies (Amendment) Act, 1988',
		'appealno' => 'Company Appeal (B) No. 1/2001',
		'appellant' => 'V.L.S. Finance Ltd.',
		'authreffered' => '',
		'casename' => 'V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors.',
		'casenote' => '(i) Company - compounding of offence - Sections 211, 621A (1) and 621A (7) of Companies Act, 1956, Section 40 (1) of Company Law Board Regulations, 1991and Criminal Procedure Code, 1973 - whether Company Law Board has power to compound offences punishable with fine or imprisonment or both without permission of Court - person seeking compounding of an offence in accordance with procedure laid down in Code of 1973 can do so before Criminal Court with permission of Court under Section 621A (7) - Company Law Board can compound an offence of nature prescribed under Section 621A (1) either before institution of criminal proceeding or even after institution of criminal proceeding - said power is not subject to provisions of Section 621A (7) - both are parallel powers to be exercised by prescribed authorities who have been empowered under statute - one power is not dependant on other - power exercised by Company Law Board in compounding offence is legal and valid.

(ii) Locus standi - whether appeal filed by appellant maintainable - appellant is aggrieved person deprived from exercising his right under Sections 621 and 621A - he was share holder of respondent's company and can file complaint in writing before Court regarding alleged offences as provided for under Section 621 - appeal maintainable.


 -  -  iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad? Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A.',
		'caseanalysis' => null,
		'casesref' => '',
		'citingcases' => '',
		'counselplain' => ' Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and; ',
		'counseldef' => ' A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ; ',
		'court' => 'Delhi',
		'court_type' => 'HC',
		'decidedon' => '2003-11-05',
		'deposition' => 'Appeal dismissed',
		'favorof' => null,
		'findings' => null,
		'judge' => ' Mukundakam Sharma, J.',
		'judgement' => '<p>Dr. Mukundakam Sharma, J.</p><p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.</p><p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:</p><p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'</p><p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. </p><p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.</p><p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:</p><p>i) Whether the present appeal is maintainable?</p><p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?</p><p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?</p><p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:</p><p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - </p><p> (a) the Company Law Board; or</p><p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:</p><p> 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:</p><p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.</p><p> (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 compound under this section.</p><p>Explanation: For the purpose of this section. - </p><p> (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;</p><p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.</p><p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.</p><p>(4) (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 Company Law Board or the Regional Director, as the case may be.</p><p>(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.</p><p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.</p><p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.</p><p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.</p><p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.</p><p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - </p><p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:</p><p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.</p><p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'</p><p> .................</p><p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'</p><p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].</p><p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-</p><p>i) Offences punishable with fine only.</p><p>ii) Offences punishable with imprisonment only.</p><p>iii) Offences punishable with fine and imprisonment.</p><p>iv) Offences punishable with fine or imprisonment.</p><p>v) Offences punishable with fine or imprisonment or both</p><p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.</p><p>Issue No. (i)</p><p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. </p><p>Issue No. (ii)</p><p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. </p><p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.</p><p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:</p><p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.</p><p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' </p><p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. </p><p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. </p><p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.</p><p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.</p><p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.</p><p>Issue No. (iii)</p><p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.</p><p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p></p><p>',
		'observations' => null,
		'overruledby' => null,
		'prhistory' => '',
		'pubs' => '2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159',
		'ratiodecidendi' => '',
		'respondent' => 'Union of India (Uoi) and ors.',
		'sub' => 'Company',
		'link' => null,
		'circuit' => null
	)
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$casename_url = 'v-l-s-finance-ltd-vs-union-india'
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	(int) 1 => 'v-l-s-finance-ltd-vs-union-india'
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	(int) 0 => '<p>Dr. Mukundakam Sharma, J.',
	(int) 1 => '<p>1. The present appeal calls for decisions on vital important questions, which have been raised by the parties hereto which are being dealt with and decided giving reasons for the the decisions.',
	(int) 2 => '<p>2. The respondent No. 2 company was incorporated on 14.2.1977 as a public company limited by shares. A show cause notice dated 16.3.2000 was issued by the Deputy Registrar of Companies under Section 211 of the Companies Act to the respondent No. 2 and its Managing Director consequent on inspection made under Section 209(A) of the Companies Act. The said show cause notice is a part of the documents which are filed. The relevant portion of the said show cause is extracted hereunder:',
	(int) 3 => '<p>'Whereas during the courses of Inspection it was observed that during the financial year 1994-95 to 1997-98 the schedule of Fixed Assets includes land worth Rs. 21 crore. The company has taken this land from NDMC on license and the land is not registered in the name of the Company. (The Company pays only license fees yearly). In fact these are rights to develop hotel projects purchased from its subsidiary. Thus rights without land has been shown as land in schedule of fixed assets which is not a true and fair view and apparently in contravention of Sec. 211 of the <a>Companies Act, 1956</a>. The nature of the land that is lease hold free hold etc. has also not been mentioned in the Annual Accounts of 1994-95.'',
	(int) 4 => '<p>3. The company was required to show cause within 15 days from the date of the notice as to why penal action may not be initiated against the company and its officers for their aforesaid default committed under Section 211 of the Act. The company submitted its reply on 28.3.2000 giving an Explanationn to the default contending, inter alia, that the company was not liable for the offence. It was also submitted that the default has been rectified in the accounts of the later years and that the offence is no longer persisting. Subsequently the respondent No. 1 as also Mr. S.P. Gupta, who is the Managing Director of the said company and to whom show cause notice was also issued, submitted an application before the Company Law Board under Section 40(1) of the Company Law Board Regulations, 1991 and Section 621A of the Companies Act for composition of offence under Section 211 of the <a>Companies Act, 1956</a>. The said application was placed before the Company Law Board in accordance with the provisions of the Companies Act, which was considered by the Company Law Board. By an order passed on 9.8.2000 the said application was allowed when an order was passed to the effect that the offence pertaining to the financial years 1994-95 to 1997-98 under Section 211 of the Companies Act be compounded against the Managing Director of the company on payment of Rs. 1, 000/- for each offence each year. It was also observed that the director shall make payment from his personal account. It was held that the compounding of offence against the company would not arise as the company was not liable for the offence. ',
	(int) 5 => '<p>4. Being aggrieved by the aforesaid order passed by the Member of the Company Law Board, the present appeal was filed in this Court by the appellant, who is the shareholder of M/s Sunair Hotels Ltd. A preliminary objection regarding the maintainability of the present appeal is also raised by the respondent No. 2 in the present appeal and, thereforee, the said objection regarding maintainability of the appeal is also required to be considered and decided along with the other issues which are raised by the appellant.',
	(int) 6 => '<p>5. I have heard the counsel appearing for the appellant as also the counsel appearing for the respondents. On the pleadings of the parties and the arguments of their counsel, the following issues would arise for my consideration in the present appeal:',
	(int) 7 => '<p>i) Whether the present appeal is maintainable?',
	(int) 8 => '<p>ii) Whether or not the Company Law Board has the power to compound offences punishable with fine or imprisonment or both without permission of the court?',
	(int) 9 => '<p>iii) Whether the order passed by the Company Law Board could be said to be a non-speaking order and, thereforee, bad?',
	(int) 10 => '<p>6. In order to appreciate the aforesaid contentions it would be necessary to extract the provisions of Section 621A and the provisions of Section 10(F) at this stage:',
	(int) 11 => '<p>Section 621A. Composition of certain offences - (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), not being an offence punishable with imprisonment only, or with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by - ',
	(int) 12 => '<p> (a) the Company Law Board; or',
	(int) 13 => '<p>(b) where the maximum amount of fine which may be imposed for such offence does not exceed five thousand rupees, by the Regional Director, on payment or credit, by the company or the officer, as the case may be, to the Central Government of such sum as that Board or the Regional Directors, as the case may be, may specify:',
	(int) 14 => '<p> 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:',
	(int) 15 => '<p>Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under the sub-section, the sum, if any, paid by way of additional fee under sub-section (2) of section 611 shall be taken into account.',
	(int) 16 => '<p> (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 compound under this section.',
	(int) 17 => '<p>Explanation: For the purpose of this section. - ',
	(int) 18 => '<p> (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;',
	(int) 19 => '<p>(b) 'Regional Director' means a person appointed by the Central Government as a Regional Director for the purposes of this Act.',
	(int) 20 => '<p> (3) Every Regional Director shall exercise the powers to compound an offence, subject to the direction, control and supervision of the Company Law Board.',
	(int) 21 => '<p>(4) (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 Company Law Board or the Regional Director, as the case may be.',
	(int) 22 => '<p>(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.',
	(int) 23 => '<p>(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 shareholder of the company or by any person authorised by the Central Government against the offender in relation to whom the offence is so compounded.',
	(int) 24 => '<p>(d) Where the composition of any offence is made after the institution of any prosecution, such composition 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged.',
	(int) 25 => '<p>(5) The Company Law Board or the Regional Director, 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 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 611, such return, account or other document within such time as may be specified in the order.',
	(int) 26 => '<p>(6) Any officer or other employee of the company who fails to comply with any order made by the Company Law Board or the Regional Director under sub-section (5) shall be punishable with imprisonment for a term which may extend to six months, or with fine not exceeding five thousand rupees, or with both.',
	(int) 27 => '<p>(7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), - ',
	(int) 28 => '<p> (a) any offence which is punishable under this Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down it that Act for compounding of offences:',
	(int) 29 => '<p>(b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.',
	(int) 30 => '<p> (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.'',
	(int) 31 => '<p> .................',
	(int) 32 => '<p> 'Section 10F. Appeals against the orders of the Company Law Board.- Any person aggrieved by any decision or order of the Company Law Board may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company Law Board to him on any question of law arising out of such order: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.'',
	(int) 33 => '<p>7. Section 621A was inserted by the Companies (Amendment) Act, 1988. This section was given effect to from 31.5.1999. The section was inserted, as it appears, after the recommendations of the SACHAR COMMITTEE, which after examining the position with regard to the launching of prosecution for violation of the provisions of the Act suggested a systematic change in respect of the penal provisions. The Sachar Committee in its report pointed out various defects in the existing scheme of prosecution. The said recommendations are contained in paragraphs 16.13 to 16.16 of the report. However, the scheme of the change recommended by the Sachar Committee appears to have been not adopted in toto while introducing the aforesaid amendment by inserting Section 621A in the Companies (Amendment) Act 1988. The Notes on clauses explained this section as follows: 'This clause empowers the Company Law Board and the Regional Director to compound offences punishable by fine by imposing penalties in lieu of prosecution. The proposed amendment will also ensure compliance of law. The power to compound shall not be exercisable by the Company Law Board and the Regional Director in relation to offences which are punishable with imprisonment only or with imprisonment and fine.' [Clause 58 of the Companies (Amendment) Bill, 1987 (32 of 1987)].',
	(int) 34 => '<p>8. The Companies Act provides for a number of punishments for different offences. The punishments can be categorised into five types, which are as follows :-',
	(int) 35 => '<p>i) Offences punishable with fine only.',
	(int) 36 => '<p>ii) Offences punishable with imprisonment only.',
	(int) 37 => '<p>iii) Offences punishable with fine and imprisonment.',
	(int) 38 => '<p>iv) Offences punishable with fine or imprisonment.',
	(int) 39 => '<p>v) Offences punishable with fine or imprisonment or both',
	(int) 40 => '<p>9. In the backdrop of the aforesaid factual matrix and the legal provisions, I may now deal with various issues that were raised by the parties.',
	(int) 41 => '<p>Issue No. (i)',
	(int) 42 => '<p>10. The aforesaid issue was raised by the counsel for the respondent contending, inter alia, that the present appeal is not maintainable as the appellant cannot be said to be an aggrieved person by the decision or order of the Company Law Board and, thereforee, the appellant has no locus standi to file the present appeal in the High Court. A perusal of the provisions of Section 621A indicates that the Company Law Board as also the Regional Director have also been invested with the power to compound an offence punishable under the Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine as has been provided for under sub-section (1) of Section 621A of the Act. Sub-section (7) of Section 621A also provides that any offence which is punishable under the Companies Act with imprisonment or with fine, or with both, shall be compoundable with the permission of the Court, in accordance with the procedure laid down in the Criminal Procedure Code. Sub-section (1) of Section 621 of the Companies Act provides that no Court shall take cognizance of any offence punishable under the Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or a shareholder of the company, or of a person authorised by the Central Government in that behalf. Counsel appearing for the appellant contended that the Company Law Board having proceeded to compound the offence on the basis of the complaint sent by the Registrar of Companies, the appellant being a shareholder is thereby deprived from exercising his right under Section 621 read with Section 621A of the Companies Act and, thereforee, the appellant is an aggrieved person against the decision as also the order and, thereforee, the present appeal is maintainable. There is a considerable force in the aforesaid submission of the counsel for the appellant when the same is considered with the contention of the counsel for the appellant that the Company Law Board does not have the jurisdiction to compound an offence without obtaining prior permission of the Court and also because the power vested under sub-section (1) of section 621A is controlled by the provision of sub-section (7) of section 621A. By raising the said questions, the appellant has raised important questions of law which are required to be resolved. Besides, the appellant being a shareholder of the respondent No. 2 company could have filed a complaint in writing before the Court regarding the alleged offences as provided for under section 621 of the Companies Act. In that view of the matter, I am of the considered opinion that the appellant has locus standi to file the present appeal. Accordingly I hold that the present appeal filed by the appellant as against the order passed by the Company Law Board is maintainable. ',
	(int) 43 => '<p>Issue No. (ii)',
	(int) 44 => '<p>11. This issue raises not only a question of law but is also very relevant and material and is dependent on the interpretation to be given to the provisions of sub-section (1) and sub-section (7). While it was the contention of the counsel appearing for the appellant that sub-section (1) is dependent and controlled by the provisions of sub-section (7), according to the counsel appearing for the respondent sub-section (1) and sub-section (7) are independent of each other and they provide for parallel powers as sub-section (1) confers jurisdiction on the Company Law Board and the Registrar, as the case may be whereas sub-section (7) confers parallel power and concurrent jurisdiction upon the criminal court to deal with matters relating to compounding of offences. ',
	(int) 45 => '<p>12. Sub-section (1) of Section 621A empowers the Company Law Board or the Regional Director, as the case may be, to compound any offence punishable under the Companies Act but not being an offence punishable with imprisonment only, or with imprisonment and also with fine. The Company Law Board can proceed to compound such offence which could be compounded either before or after the institution of any prosecution. However, the provision of Section 621A(1)(b) restricts the power of the Regional Director to compound offences by providing that he can compound only those offences which are punishable with maximum fine of Rs. 5, 000/- . The procedure for compounding such offences by the Regional Director or the Company Law Board is provided for under sub-section (3) to sub-section (6). Sub-section (4)(a) provides that 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 Company Law Board or the Regional Director, as the case may be. Sub-section (4)(b) of the aforesaid section provides that where an 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. Sub-section (4)(d) is also relevant in this context as it provides that where the composition of any offence is made after the institution of any prosecution, such composition would 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 composition of the offence being given, the company or its officer in relation to whom the offence is so compounded shall be discharged. thereforee, it appears from the aforesaid provisions that an offence committed by a company or any officer not being an offence punishable with imprisonment only or imprisonment and also with fine can be either before or after institution of any prosecution compounded by the Company Law Board. The criminal court is also invested with a similar power to compound an offence as provided for under sub-section (7), after institution of an prosecution.',
	(int) 46 => '<p>13. Almost an identical issue came up for consideration before the Company Law Board in Hoffland Finance Ltd., In re., which is reported in 1997 Company Cases (Vol.90) 38. After taking notice of the various relevant provisions including that of Section 621A, the Company Law Board held as follows:',
	(int) 47 => '<p>'The position which emerges from the above discussion is that, sub-section (1) confers powers on the Regional Director to compound offences punishable with fine only subject to certain limitation. It confers powers on the Company Law Board to compound offences which are punishable with fine only, those punishable with fine or imprisonment and those which are punishable with fine or imprisonment or with both, and sub-section (7) confers upon the court, concurrent jurisdiction to compound offences which are punishable with fine or imprisonment or both and that while the Company Law Board/Regional Director would follow the procedure laid down in the Companies Act, the court will follow the procedure laid down in the Criminal Procedure Code.',
	(int) 48 => '<p>Accordingly, we hold that the exercise of powers by the Company Law Board under 621A(1) is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court.' ',
	(int) 49 => '<p>14. It is an accepted position that there is no decision of any High Court or of the Supreme Court on the aforesaid question except for the aforesaid decision of the Company Law Board in Hoff land Finance Ltd. (supra). I have carefully perused the decision of Hoff land Finance Ltd. (supra) and also considered the arguments of the counsel for the parties in order to arrive at a just and proper decision in this matter. ',
	(int) 50 => '<p>15. Having considered the submissions as also the provisions of Section 621A, I am of the considered opinion that by insertion of the provisions of sub-section (1) into the provision of Section 621A, power has been vested on the Company Law Board to compound an offence of the nature provided for in that sub-section either before or after the institution of any prosecution. thereforee, the Company Law Board can exercise its right to compound the offence of the nature provided for in the Section before institution of any prosecution as also after the institution of any prosecution. Sub-section (7), however, is attracted only after the institution of the prosecution, for a Court can compound an offence only when the prosecution is launched and a criminal case is instituted. Both the provisions of sub-section (1) and sub-section (7) start with a non-obstante clause as 'notwithstanding anything contained in the Code of Criminal Procedure'. Specific provision has been made in the Code of Criminal Procedure for compounding offences of the nature as prescribed by inserting a provision of Section 320 Cr.P.C. When the criminal Court proceeds to compound an offence committed under the Companies Act, the same could be compounded with the permission of the Court but the same is required to be so compounded according to the procedure laid down in the Criminal Procedure Code for compounding of offences. When the Company Law Board proceeds to compound a prescribed offence, it proceeds to compound the offence even prior to or after institution of any prosecution. In the event of composition of offence by the Company Law Board after institution of prosecution, the same is to be brought by the Registrar in writing to the notice of the Court in which the prosecution is pending and upon such notice being given by the Registrar to the Court of composition of the offence, the company or its officers in relation to whom the offence is so compounded would be discharged. This sub-section makes it clear and apparent that the Company Law Board can exercise its power of composition either before the institution of the prosecution or even after institution of the prosecution and can order for composition of an offence which could be compounded by the Company Law Board and when notice of such composition by the Company Law Board is given by the Registrar to the criminal court in which the prosecution is pending, the same would result in discharge of the accused, namely, the company or its officer. When these provisions are read harmoniously, it is crystal clear that this is an independent power given to the Company Law Board investing it with the power to compound an offence of the nature prescribed in the said provision and when the said Board is satisfied that it is a fit case for compounding, it could order for compounding of the said offence prior to launching of prosecution and even thereafter irrespective of the fact that the prosecution has been launched in respect of the said offence and is pending trial before the criminal court. The only requirement that is provided for is to give a notice of the said composition of the offence to the criminal Court by the Registrar upon which the accused would stand discharged from the offence. ',
	(int) 51 => '<p>16. Sub-section (7), on the other hand, appears to be a parallel power which is also given to the criminal court but the said power of composition could be exercised by the criminal court only after institution of the criminal proceeding. A criminal court does not enjoy any power under the Companies Act to order for composition of an offence committed under the Companies Act before the institution of the proceeding. Counsel appearing for the appellant, however, submitted that the word 'prior' should be read into the expression 'with the permission of the court'meaning thereby 'with the prior permission of the court' as otherwise the same would lead to an ambiguity and would render sub-section (7) nugatory. I am unable to appreciate and accept the aforesaid contention of the counsel for the appellant, for according to the rules of interpretation of statutes, the words in a section have to be given their plain grammatical meaning to find out the intention of the legislature. A Statute is to be interpreted and construed in a manner which carries out the intent and purpose for which the legislature has enacted the provision. The intention of the legislature in enacting the aforesaid provision is clear and the same appears to be in consonance with the object for bringing in the aforesaid amendment in 1988. The aforesaid enactment was brought in view of the understanding that there is a great need of leniency in the administration of the Act particularly its penalty provisions not only because a large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and complex nature of the provisions. It is also cardinal rule of interpretation that words, phrases and sentences are to be given their natural, plain and clear meaning when the language is clear and unambiguous, it must be interpreted in its ordinary sense and no addition or alternation of the words or expression used is permissible. Such addition or alternation of words is permissible only to avoid patent absurdity. If the contention of the counsel for the appellant is accepted, the entire sub-section (4) of the Section would be rendered otiose, which is not permissible.',
	(int) 52 => '<p>17. The procedure as provided for composition of an offence under sub-section (1) is the procedure as prescribed under the Companies Act i.e. from sub-section (3) to sub-section (6) whereas the procedure that has to be followed for composition of an offence under the provisions of sub-section (7) is the procedure prescribed under the Criminal Procedure Code and, thereforee, the procedures for compounding of offences as set out in sub-section (1) and sub-section (7) are different. They are apparently independent and parallel provisions and have no bearing or relevancy with each other. It was also argued by the counsel for the appellant that although the fifth category of punishment, namely, offences punishable with fine or imprisonment or both is an independent form of punishment than other four types of punishment yet the reference to the expression 'both' in the fifth type of punishment would ultimately include the same within the expression offences punishable with fine and imprisonment, which is another type of punishment. I am unable to agree with the aforesaid submission, for the fifth category of punishment is separate and distinct from the punishment from the punishment of the offences punishable with fine and imprisonment. The use of the expression 'both' appearing in the fifth category of punishment cannot make the said punishment equivalent to the punishment of the third category. It is an independent and separate form of punishment. The word 'prior' cannot also be read in the expression 'permission of the court', as suggested.',
	(int) 53 => '<p>18. In the light of the aforesaid discussions, it is held that the person seeking compounding of an offence in accordance with the procedure laid down in the Criminal Procedure Code can do so before the criminal Court with the permission of the Court under sub-section (7) of Section 621A of the Act, which normally cannot be done under the provisions of the Criminal Procedure Code. Such compounding of offence would always be relatable to the offence punishable with imprisonment or with fine or with both as is made clear under clauses (a) and (b) of sub-section (7). Under the aforesaid sub-section the offence punishable with imprisonment or with fine or both shall be compoundable with the permission of the Court and for such compounding the procedure laid down under the Criminal Procedure Code is to be followed in that regard provided the prosecution is pending in that Court. I also hold the Company Law Board can compound an offence of the nature prescribed under sub-section (1) either before the institution of the criminal proceeding or even after institution of the criminal proceeding and the said power is not subject to the provisions of sub-section (7). Both are parallel powers to be exercised by the prescribed authorities who have been empowered under the statute and one power is not dependent on the other. The issue No. (ii) is accordingly answered against the appellant holding that the power exercised by the Company Law Board in the present case in compounding the offence although the prosecution was pending in the criminal Court, is legal and valid.',
	(int) 54 => '<p>Issue No. (iii)',
	(int) 55 => '<p>19. After returning the verdict in the aforesaid manner with regard to the first two issues, I may proceed to deal with the last issue, which arises for my consideration in the present appeal. It is contended by the counsel appearing for the appellant that no reason has been given by the Company Law Board in arriving at its conclusion recorded in the impugned order. I am unable to agree with the aforesaid contention of the counsel for the appellant, for a perusal of the order would indicate that the provisions of Section 621A were considered by the Board and thereafter it was satisfied that the facts and circumstances justify the exercise of the power vested on the Company Law Board under the provision of sub-section (1) of Section 621A. The exercise of the power by the Company Law Board is, thereforee, held to be just and proper and cannot be questioned on the ground that it does not contain any reason.',
	(int) 56 => '<p>20. In the light of the aforesaid discussion, I hold that there is no merit in the submission of the counsel for the appellant and thereforee, there is no merit in the appeal filed by the appellant. The appeal stands dismissed but without any cost.<p>',
	(int) 57 => '<p>'
)
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Subject	Company
Court	Delhi High Court
Decided On	Nov-05-2003
Case Number	Company Appeal (B) No. 1/2001
Judge	Mukundakam Sharma, J.
Reported in	2003VIIIAD(Delhi)166; [2005]123CompCas433(Delhi); 108(2003)DLT159
Acts	Companies Act, 1956 - Sections 209(A), 211, 621, 621A, 621A(1) and 621A(7); Company Law Board Regulations, 1991 - Sections 40(1); Code of Criminal Procedure (CrPC) , 1973; Companies (Amendment) Act, 1988
Appellant	V.L.S. Finance Ltd.
Respondent	Union of India (Uoi) and ors.
Appellant Advocate	Manmohan, Sr. Adv.,; Bina Gupta,; Rakhi Ray and;
Respondent Advocate	A.K. Bhardwaj, Adv. and ; S.K. Sharma, Deputy Registrar of Companies for respondent Nos. 1 and 4 and ;
Disposition	Appeal dismissed

V.L.S. Finance Ltd. Vs. Union of India (Uoi) and ors. - Court Judgment