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compounding of offence under Section 211(7) of the Companies Act.= Now the question is whether in the aforesaid circumstances the Company Law Board can compound offence punishable with fine or imprisonment or both without permission of the court. It is pointed out that when the prosecution has been laid, it is the criminal court which is in seisin of the matter and it is only the magistrate or the court in seisin of the matter who can accord permission to compound the offence.= “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- (a) the Company Law Board; or (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 Director, as the case may be, may specify: Provided that the sum so specified shall not, in any case, exceed the maximum amount of the fine which may be imposed for the offence so compounded: Provided further that in specifying the sum required to be paid or credited for the compounding of an offence under this sub-section, the sum, if any, paid by way of additional fee under Sub-section (2) of Section 611 shall be taken into account. xx xx xx (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. (b) Where any offence is compounded under this section, whether before or after the institution of any prosecution, an intimation thereof shall be given by the company to the Registrar within seven days from the date on which the offence is so compounded. (c) Where any offence is compounded before the institution of any prosecution, no prosecution shall be instituted in relation to such offence, either by the Registrar or by any 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. (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. xx xx xx (7) Notwithstanding anything contained in the Code of Criminal Procedure, 1973,- (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 in that Act for compounding of offences; (b) any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable. (8) No offence specified in this section shall be compounded except under and in accordance with the provisions of this section.”= The legislature in its wisdom has not put the rider of prior permission of the court before compounding the offence by the Company Law Board and in case the contention of the appellant is accepted, same would amount to addition of the words “with the prior permission of the court” in the Act, which is not permissible. As is well settled, while interpreting the provisions of a statute, the court avoids rejection or addition of words and resort to that only in exceptional circumstances to achieve the purpose of Act or give purposeful meaning. It is also a 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 an ordinary sense and no addition or alteration of the words or expressions used is permissible. As observed earlier, the aforesaid enactment was brought in view of the need of leniency in the administration of the Act because a large number of defaults are of technical nature and many defaults occurred because of the complex nature of the provision. From what we have observed above, we are of the opinion that the power under sub-section (1) and sub-section (7) of Section 621A are parallel powers to be exercised by the Company Law Board or the authorities mentioned therein and prior permission of Court is not necessary for compounding the offence, when power of compounding is exercised by the Company Law Board. In view of what we have observed above, the order impugned does not require any interference by this Court. In the result, we do not find any merit in the appeal and it is dismissed accordingly but without any order as to costs.

Page 1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 2102 OF 2004
V.L.S. FINANCE LTD. …APPELLANT
VERSUS
UNION OF INDIA & ORS. …RESPONDENTS
JUDGMENT
CHANDRAMAULI KR. PRASAD,J.
This appeal by special leave arises out of an
order dated 5th of November, 2003 passed by the
Company Judge, Delhi High Court in Company Appeal
(B) No. 1 of 2001 whereby it has dismissed the
appeal assailing the order of the Company Law Board
allowing the compounding of offence under Section
211(7) of the Companies Act.Page 2
Short facts giving rise to the present appeal
are that the Registrar of Companies, NCT of Delhi
and Haryana laid complaint in the Court of Chief
Metropolitan Magistrate, Tis Hazari, inter alia
alleging that during the course of inspection it
was noticed in the balance sheet of 1995-96
Schedule of the fixed assets included land worth
Rs. 21 crores. According to the complaint,
M/s. Sunair Hotels Ltd., for short ‘the Company”,
had taken this land from New Delhi Municipal
Corporation on licence and the Company only pays
the yearly licence fee thereof. Thus, according to
the complainant, without any right land has been
shown as land in the Schedule of fixed assets,
which is not a true and fair view and punishable
under Section 211(7) of the Companies Act,
hereinafter referred to as “the Act”. The Company
and its Chairman-cum-Managing Director, S.P. Gupta
were arrayed as accused.
However, before the court in seisin of the case
could proceed with the complaint, the Company and
2Page 3
its Managing Director jointly filed an application
before the Company Law Board for compounding the
offence. The Northern Region Bench of the Company
Law Board, by its order dated 9th of August, 2000
acceded to the prayer and compounded the offence
against the Managing Director on payment of
Rs. 1000/- for each offence each year. While doing
so, the Company Law Board has held as follows:
“…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 Company Law Board
without any reference to sub-section
(7), even in cases where prosecution
is pending in a criminal court. Thus,
it is clear that Company Law Board if
so approached can compound offences
and in such case no prior permission
of the Court is necessary.”
Aggrieved by the same, appellant preferred
Company Appeal before the High Court, inter alia,
contending that the power of compounding could be
exercised by the criminal court and not by the
3Page 4
Company Law Board. Said submission has not found
favour and the Company Judge, in this connection,
observed as follows:
“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
4Page 5
authorities who have been empowered
under the statute and one power is not
dependent on the other……”
Accordingly, the Company Judge dismissed the
appeal.
That is how the appellant is before us.
We have heard Mr. R. Shankaranarayanan, for the
appellant, Ms. Binu Tamta, for the respondent-Union
of India and Mr. Jayant Bhushan, Senior Advocate
for the Company and its Managing Director.
It is an admitted position that the allegations
made exposed the accused to an offence punishable
under Section 211(7) of the Act. The same reads as
under:
“211. Form and contents of balancesheet and profit and loss account.—
xxx xxx xxx
(7) If any such person as is referred
to in sub-section (6) of section 209
fails to take all reasonable steps to
secure compliance by the company, as
respects any accounts laid before the
company in general meeting, with the
5Page 6
provisions of this section and with
the other requirements of this Act as
to the matters to be stated in the
accounts, he shall, in respect of each
offence, be punishable with
imprisonment for a term which may
extend to six months, or with fine
which may extend to ten thousand
rupees, or with both:
Provided that in any proceedings
against a person in respect of an
offence under this section, it shall
be a defence to prove that a competent
and reliable person was charged with
the duty of seeing that the provisions
of this section and the other
requirements aforesaid were complied
with and was in a position to
discharge that duty:
Provided further that no person
shall be sentenced to imprisonment for
any such offence unless it was
committed wilfully.
xxx xxx xxx”
Thus, the offence alleged is punishable with
imprisonment for a term which may extend to six
months or with fine which may extend to
Rs. 10,000/- or with both.
Mr. Shankaranarayanan has taken an extreme
stand before this Court and contends that the
6Page 7
Company Law Board has no jurisdiction to compound
an offence punishable under Section 211(7) of the
Act as the punishment provided is imprisonment
also. Mr. Bhushan, however, submits that
imprisonment is not mandatory punishment under
Section 211(7) of the Act and, hence, the Company
Law Board has the authority to compound the same.
He also points out that this submission was not at
all advanced before the Company Law Board and,
therefore, the appellant cannot be permitted to
raise this question for the first time before this
Court. We are not in agreement with Mr. Bhushan in
regard to his plea that this question cannot be
gone into by this Court at the first instance. In
our opinion, in a case in which the facts pleaded
give rise to a pure question of law going to the
root of the matter, this Court possesses discretion
to go into that. The position would have been
different had the appellant for the first time
prayed before this Court for adjudication on an
issue of fact and then to apply the law and hold
7Page 8
that Company Law Board had no jurisdiction to
compound the offence.
Here, it is an admitted position that the
allegation made exposed the Company and its
Managing Director for punishment under Section
211(7) of the Act which provides for imprisonment
or fine or with both. In the face of the same, no
fact needs to be adjudicated and the point being a
pure question of law going to the root of the
matter, same can be permitted to be raised before
this Court for the first time. But that does not
help the appellant as we are inclined to accept the
submission of Mr. Bhushan on merit. Section 621A
was inserted by the Companies Amendment Act, 1988
on the recommendation of the Sachar Committee. It
was felt that leniency is required in the
administration of the provisions of the Act
particularly penalty provisions because a large
number of defaults are of technical nature and
arise out of ignorance on account of bewildering
complexity of the provisions. Section 621A of the
8Page 9
Act; as stood at the relevant time and relevant for
our purpose reads as follows:
“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-
(a) the Company Law Board; or
(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 Director, as
the case may be, may specify:
Provided that the sum so
specified shall not, in any case,
exceed the maximum amount of the
fine which may be imposed for the
offence so compounded:
Provided further that in
specifying the sum required to be
paid or credited for the
compounding of an offence under
this sub-section, the sum, if any,
9Page 10
paid by way of additional fee under
Sub-section (2) of Section 611
shall be taken into account.
xx xx xx
(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.
(b) Where any offence is compounded
under this section, whether before
or after the institution of any
prosecution, an intimation thereof
shall be given by the company to
the Registrar within seven days
from the date on which the offence
is so compounded.
(c) Where any offence is compounded
before the institution of any
prosecution, no prosecution shall
be instituted in relation to such
offence, either by the Registrar or
by any 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.
(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
10Page 11
notice of the composition of the
offence being given, the company or
its officer in relation to whom the
offence is so compounded shall be
discharged.
xx xx xx
(7) Notwithstanding anything contained
in the Code of Criminal Procedure,
1973,-
(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 in that Act for
compounding of offences;
(b) any offence which is punishable
under this Act with imprisonment
only or with imprisonment and also
with fine shall not be
compoundable.
(8) No offence specified in this
section shall be compounded except
under and in accordance with the
provisions of this section.”
From a plain reading of Section 621A(1) it is
evident that any offence punishable under the Act,
not being an offence punishable with imprisonment
only or with imprisonment and also with fine, may
be compounded either before or after the
institution of the prosecution by the Company Law
11Page 12
Board and in case, the minimum amount of fine which
may be imposed for such offence does not exceed
Rs. 5000/-, by the Regional Director on payment of
certain fine. The penal provisions of the Act
provide for different kinds of punishments for
variety of offences and can be categorised as
follows:
(i) offences punishable with fine only,
(ii) offences punishable with imprisonment
only,
(ii) offences punishable with fine and
imprisonment,
(iv) offences punishable with fine or
imprisonment,
(v) offences punishable with fine or
imprisonment or both.
Section 211(7) of the Act provides for
punishment with imprisonment for a term which may
extend to six months or with fine or with both.
Therefore, an accused charged with the offence
under Section 211(7) of the Act has not necessarily
to be visited with imprisonment or imprisonment and
12Page 13
also fine but can be let off by imposition of fine
only. Therefore, the punishment provided under
Section 211(7) of the Act comes under category (v)
aforesaid. Section 621A(1) excludes such offences
which are punishable with imprisonment only or with
imprisonment and also with fine. As we have
observed above, the nature of offence for which the
accused has been charged necessarily does not
invite imprisonment or imprisonment and also fine.
Hence, we are of the opinion that the nature of the
offence is such that it was possible to be
compounded by the Company Law Board.
Mr. Shankaranarayanan, then submits that subsection (7) of Section 621A confers jurisdiction on
the court to accord permission for compounding of
the offence punishable with imprisonment or with
fine or with both, the jurisdiction of the Company
Law Board is excluded and, therefore, the Company
Law Board erred in acceding to the request of the
accused for compounding of the offence.
Sub-section (1) of Section 621A and sub-section (7)
13Page 14
thereof are differently worded but on their close
reading it is evident that both cover such offences
depending upon the nature of punishment.
Sub-section (1) of Section 621A excludes offence
punishable with imprisonment only or with
imprisonment and also fine and includes the residue
offences which will obviously include offence
punishable with imprisonment or with fine or with
both whereas sub-section (7) specifically include
those and excludes, like sub-section (1), offences
punishable with imprisonment only or with
imprisonment and also fine. Therefore, both cover
similar nature of offences. Hence, the power for
compounding can be exercised in relation to the
same nature of offences by the Company Law Board or
the court in seisin of the matter with the
difference that the Company Law Board can proceed
to compound such offence either before or after the
institution of any prosecution. In this
connection, it shall be relevant to refer to
Section 621A(4)b) of the Act, which provides that
where any offence is compounded under this section,
14Page 15
whether before or after the institution of any
prosecution, an intimation thereof shall be given
by the Company to the Registrar within 7 days from
the date on which the offence is compounded.
Section 621A(4)d) mandates 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 accused in relation to
whom the offence is so compounded shall be
discharged.
From the conspectus of what we have observed
above, it is more than clear that an offence
committed by an accused under the Act, not being an
offence punishable with imprisonment only or
imprisonment and also with fine, is permissible to
be compounded by the Company Law Board either
before or after the institution of any prosecution.
In view of sub-section (7) of Section 621A, the
15Page 16
criminal court also possesses similar power to
compound an offence after institution of the
prosecution.
Now the question is whether in the aforesaid
circumstances the Company Law Board can compound
offence punishable with fine or imprisonment or
both without permission of the court. It is
pointed out that when the prosecution has been
laid, it is the criminal court which is in seisin
of the matter and it is only the magistrate or the
court in seisin of the matter who can accord
permission to compound the offence. In any view of
the matter, according to the learned counsel, the
Company Law Board has to seek permission of the
court and it cannot compound the offence without
such permission. This line of reasoning does not
commend us. Both sub-section (1) and sub-section
(7) of Section 621A of the Act start with a
non-obstante clause. As is well known, a
non-obstante clause is used as a legislative device
to give the enacting part of the section, in case
16Page 17
of conflict, an overriding effect over the
provisions of the Act mentioned in the non-obstante
clause.
Ordinarily, the offence is compounded under the
provisions of the Code of Criminal Procedure and
the power to accord permission is conferred on the
court excepting those offences for which the
permission is not required. However, in view of
the non-obstante clause, the power of composition
can be exercised by the court or the Company Law
Board. The legislature has conferred the same
power to the Company Law Board which can exercise
its power either before or after the institution of
any prosecution whereas the criminal court has no
power to accord permission for composition of an
offence before the institution of the proceeding.
The legislature in its wisdom has not put the rider
of prior permission of the court before compounding
the offence by the Company Law Board and in case
the contention of the appellant is accepted, same
would amount to addition of the words “with the
17Page 18
prior permission of the court” in the Act, which is
not permissible.
As is well settled, while interpreting the
provisions of a statute, the court avoids rejection
or addition of words and resort to that only in
exceptional circumstances to achieve the purpose of
Act or give purposeful meaning. It is also a
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 an ordinary
sense and no addition or alteration of the words or
expressions used is permissible. As observed
earlier, the aforesaid enactment was brought in
view of the need of leniency in the administration
of the Act because a large number of defaults are
of technical nature and many defaults occurred
because of the complex nature of the provision.
From what we have observed above, we are of the
opinion that the power under sub-section (1) and
18Page 19
sub-section (7) of Section 621A are parallel powers
to be exercised by the Company Law Board or the
authorities mentioned therein and prior permission
of Court is not necessary for compounding the
offence, when power of compounding is exercised by
the Company Law Board. In view of what we have
observed above, the order impugned does not require
any interference by this Court.
In the result, we do not find any merit in the
appeal and it is dismissed accordingly but without
any order as to costs.
………………………………………………………………J
(CHANDRAMAULI KR. PRASAD)
………..……….………………………………..J
(V.GOPALA GOWDA)
NEW DELHI,
MAY 10, 2013.
19

 

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