URGENT - Compounding of offence u/s 166, 210

[Sachin Arora]

Dear professional colleagues,

One of my client company got the notice from ROC for non-filing of Annual Accounts for last 2 years. Later on, Directors of the company got the summon to appear before the district court. Does any one has the idea how to proceed now. What will the procedure to initiate for the Compouding of offence with CLB under section 166, 210 of the Companies Act, 1956.

Thanks in advance.


Best regards,
Sachin Arora
Arun Gupta & Associates
Company Secretaries
3013/15A, Ground Floor,
Gali No. 19, Ranjeet Nagar,
New Delhi - 110008
Contact: 09899275325, 011-25704063

[Jayashree Chandrasekaran]

I think now that the District Court has issued summons you cannot file compounding of offence...the directors will have to appear and say

that it was an unintentional lapse and pay the fine....though this is pain since the director will have to appear this is a cheaper process!!!

I think the best way will be to go to ROC office and check if there are any other alternative

Jayashree

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[csarengarajan]

Earlier we have posted some case laws which may be useful

 

NON FILING OF BALANCE SHEET ALONG WITH ANNEXURES AND ATTACHEMENTS

There are frequent queries are coming in the forum  for non filing of Balance Sheet and Annual Return with MCA. Non filing of Annual Accounts and Annual Return are continuing offence. There is no limitation for return not filed. I  am reproducing court judgments here for better understanding.  In one case it has been mentioned that if MD is not there then only prosecution to be launched against Directors.(HC quashes prosecution against Express group directors) I have also attached another file

 

Members veiw solicited.

 

 

 

 

Brief: The filing of Annual Accounts and Balance sheet is one of the statutory obligation of the company and its directors. Non filing of Balance sheet or Annual Return is continuing offence as provided in Section 162 of the Companies Act, 1956.  If any compliant received from person or Registrar of Companies can suo moto prosecute the company for not filing the returns.

 

 

As per sub section (3) of Sectio 220, if default is made in complying with the requirements of sub sections (1) and (2) , the company and every officer of the company who is in default shall be liable  to the like punishment as is provided by section 162  for a default in complying with the provisions of section159. 160 or 161.

 

sub section (1) of section 220 provides that three copies of balance sheet alongwith annexures and attachements after they have been laid at the annual general meeting to be filed  electronically form 23AC and Form 23ACA within 30 days of the AGM

 

Sub section (2) of Section 220 provides that when the accounts are not adopted at the AGM.  A company must file  with the Registrar  alongwith annual accounts , a statement of fact as per any one of the details.

 

a) AGM not adopt the Balance sheet  or

b)   AGM adjourned without adopting  the balance sheet  or

c) if the AGM of a company  for any year has not been held

 

For default in complying the provisions of section 220 of the Companies Act, 1956, company and every officer  of the company who is in default shall be punishable with a fine  upto Rs.500 per day.

 

In the case of Kishan Prasad Palaypu v. Registrar of Companies in Andhra pradesh High court.

CRIMINAL PETITION NO. 1338 OF 2003  Date of judgment :   November 23, 2006
 

 

Brief facts of the case:  The petitioner director failure  to file the balance sheet alongwith annexures and attachments under sub section (1) of Section 220 of the Companies Act, 1956.  The petitioner moved the Court under section 482 of the Code for quashing the proceedings contending that the complaints filed were barred by limitation under section 468 of code of criminal procedure.

 

Held: Section 162 imposes penalty of Rs.500 per day for default  continues.    The continuing default under Section 220 of the Companies Act, 1956 covered under Section 472 of code of criminal procedure not under Sectiton 468 of code of criminal procedure. The court held that it is contravention of Section 220 and liable to be prosecuted company and  every oficer of the company who is in default.

 

As per Section 472 of code of criminal procedure provides that In the case of a continuing offence, a fresh period of limitation shall begin to run at every moment of the time during which the offence continues.

 

Non-filing of balance sheet -- HC quashes proceedings against Express group directors (March 9, 2001)

Our Legal Correspondent

CHENNAI, March 9

THE Madras High Court has said that the prosecution launched against the directors of Nariman Point Building Services & Trade Pvt Ltd (of Express Group, Mumbai) by the Additional Chief Metropolitan Magistrate, Economic Offences Court, Egmore, Chennai, fo r non-filing of balance sheet and profit and loss account was vitiated in view of the absence of a plea that no specific person was in-charge and responsible for conduct of the business of the Company.

Quashing the proceedings before the Additional Chief Metropolitan Magistrate, Mr Justice B. Akbar Basha Kadiri, said that nowhere in the complaint it was stated that there was a managing director or a person who was attending to the Company's affairs and in-charge and responsible for conduct of business.

The petitioners -- Nariman Point Building Services & Trade Pvt Ltd, and Mr Vivek Goenka, Mr Nusli Wadia, Mr Venu Srinivasan, Mr Rajendra Shah and Mr Tulip Singh (all directors of the Company) -- sought to quash the proceedings in the file of the Addition al Chief Metropolitan Magistrate. The accused in the case had come forward with this criminal OP to quash the proceedings which had arisen in the following circumstances:

The Assistant Registrar of Companies preferred a complaint before the Economic Offences Wing against the petitioners alleging that R 1 (Nariman Point), in which the petitioners were directors, had failed to file the balance sheet and profit and loss acco unt as on March 31, 1992, and thus failed to comply with the statutory requirements under Section 220 of the Companies Act.

The Additional CMM took the matter on file and issued summons to the petitioners and others. Aggrieved, they had filed the criminal appeals stating that there was nothing to show that the petitioners were in-charge and responsible for conducting the busi ness of the Company. There was no mention in the complaint about any overt act committed by the directors and the prosecution failed to fix the liability with a particular officer for the default. They had pleaded that one Mrs Saroj Goenka had instituted a suit challenging the transfer of shares in the Company from her and her daughters to another person (late Ramnath Goenka) and obtained an order of injunction, and because of this pending suit, the annual general meeting could not be held for the year ending March 31, 1992. Therefore, the balance sheet and the profit and loss account could not be filed.

Section 220(3) said that if default was made in complying with the requirements, every officer of the Company who was in default shall be liable to punishment as provided in Section 152 of the Act.

The Judge said that the petitioners admitted they were directors, but they would be liable only if there was no managing director. In the absence of any such person holding charge and responsible for conducting the business of the Company, the directors could be proceeded against.

In view of the finding that the prosecution of directors in the absence of a plea that no specific person was in-charge and responsible for conduct of the business of the Company, was vitiated. The Judge said he was inclined to allow the criminal OP. Hen ce, further proceedings pending on the file of the Additional Chief Metropolitan Magistrate were quashed

 

 

 

csarengarajan
Company Secretary, Chennai
email csaren...@gmail.com
mobile 093810 11200
SHARING KNOWLEDGE SKY IS THE LIMIT

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csarengarajan
Company Secretary, Chennai
email csaren...@gmail.com
mobile 093810 11200
SHARING KNOWLEDGE SKY IS THE LIMIT

[Sachin Arora]

Thanks Jayashree and Arengrajan for their reply and valuable information in this regard.

Best regards,
Sachin Arora
Arun Gupta & Associates
Company Secretaries
3013/15A, Ground Floor,
Gali No. 19, Ranjeet Nagar,
New Delhi - 110008
Contact: 09899275325, 011-25704063

[CS Sonam Garg]

Dear All

One of my company has received a notice from the MCA regarding defaults in filling of Balance sheets and /or annual return for any previous year, now compounding of the said offence is being asked. Request you to pl guide and provide me the format of the Compounding application along with the reply of the same.

Early response will be highly appreciated.