Compounding of offences U/s 441 of Companies Act, 2013

Compounding is covered under Sec 441 of Companies Act, 2013. Though compounding has not been defined under any act and the dictionary meaning of compounding is make (something bad) worse; intensify the negative aspects of. In Companies act 2013, it is a process whereby NCLT waive off some part of penalties for the offences committed by the Company. Compounding of offences will be done after the default is made good. Compounding is merely done of all the offences committed by the Company or any officers there of .

(1) Compounding can be done by NCLT or R.D( Regional Director) depending upon the  following cases:

(a) when the penalty of any offence does not exceed Twenty Five lac rupees, then those cases shall be entertained by R.D.( Regional director), or

(b) when the penalty of an offence exceed Twenty five lac then that shall be entertained by  NCLT.

on the payment by the company to the central government the sum as specified

by NCLT or Regional director as the case maybe.

Proviso to Sub section (1), the sum payable to central government shall not exceed the penalty for such an offence for which compounding is to be done and the sum payable shall include the additional fee payable under Sec 403(2) i.e., fee for not registering, submitting, filing documents, information which were required to be filed, registered, submitted with in the specified time.

(2) If any offence will be committed within three years from the previous offence then that shall not be compounded. If any offence will be constituted after three years of the previous offence then only it will be able to be compounded.

(3)(a) Every application for the compounding of an offence shall be made to the registrar by the company ho shall forward the same to the NCLT OR Regional Director or such other officer as may be authorized by the Central Government.

(b) Where any offence will be compounded before or after the institution of any prosecution then that shall be intimated by the company to the registrar with in seven days of the compounding of an offence.

(c) Where any offence is compounded before the institution of any prosecution then those offence shall not be prosecuted.

(d) Where any offence shall be prosecuted after the initiation of any prosecution then that shall be brought by the registrar to the court in which the compounding of the offence is pending.

(5) Any officer or the other employee of the company who fails to comply with the order of the regional director or tribunal or any other officer authorized by the central government shall be punishable with the imprisonment for the term which may extend to six months or with a fine not exceeding one lakh rupees or both.

List of compoundable offences

  • Offences having the penalty of fine only – Entertained by NCLT, RD, or any other officer authorized by the CG
  • Offences having the penalty of, imprisonment or fine both-  Entertained by NCLT, RD, or any other officer authorized by the CG by the permission of special court.

List of Non Compoundable offence –

  • Offences having the penalty of only Imprisonment
  • Offences having the penalty of fine and imprisonment

Procedure of Compounding

Step 1: Company will call the board meeting by following the procedure of companies act 2013 and SS-1 wherein the amount of penalty as per the provisions of act will be decided and resolution shall be passed for the compounding of an offence. The application for the compounding of an offence shall be given to the registrar.

Step 2: Registrar shall forward the application along with his comment to the NCLT or the Regional director or any other officer authorized by the CG. Application for compounding shall be given in e-Form GNL-1 along with the fee of Rs. 10000.

Step 3: Hearing will be done by the Regional Director/ NCLT and that can be attended by the director, secretary or officer of the company or by the authorized representative of CA, CS, CMA.

Step 4: Regional Director/ NCLT shall compound the offence by giving company or Officers- in- default an opportunity of being heard.   

Documents required for Compounding

  • Copy of Board Resolution passed by the Company in its Board meeting by following the provisions of Sec 173 of the Companies Act, 2013.
  • Application for Compounding given by the company to the Registrar.
  • E- form GNL- 1.

Case Laws relating to Compounding

 In case of M/S Reflexis System India Pvt. Ltd dated 10.08.2017

In the above case it was held that Company conducted its AGM on 21st October 2016, and violated the provisions of Sec 96 and was liable for penalty under Sec (99) of the Companies Act, 2013.

Reason for delay- As per the provision of Sec (96), Company is required to conduct its AGM Of F.Y. till 30th September. Therefore in the above case, Company was required to conduct its AGM of F.Y. 2015-16 till 30th September 2016, but it conducted its AGM on 21st October 2016. Therefore it was regarded as violation of law and Company made an application to the registrar for compounding  of such offence. Company secretary Mr. Dinesh Joshi explain the reason for such an offence stating that statutory auditor resigned on 10th March 2016 and new Statutory Auditor was appointed on 25th April and the Audit report was prepared thereafter and immediately after the finalisation of accounts steps were taken to convene AGM.

In the Case of Inter Equipment India (Pvt) Ltd

In the above case It was mentioned that Inter Equipment India (Pvt) Ltd had violated the provisions of   Sec 96 by not holding AGM from 2008-2015 but it made the default good By Conduction AGM of 2008- 2015 on 14th June 2016. of Companies Act 2013 and therefore it was liable for penal provisions under Sec (99) of Companies act, 2013.

Reason for delay- Mr. kartik Soma Sundaram stated that there was dispute between the members of company and the case regarding dispute was pending in high court and therefore Company could not file the return within the required time.

On the Examination the Court held that a fine of Rs.5000/- by the applicant company and a fine of Rs.2500/- by each director shall be sufficient restraint to prevent that company from committing the offnce again.


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