NCLT Mumbai Allows Compounding of Offence for Failing to Hold AGMs on Time

NCLT Mumbai Allows Compounding of Offence for Failing to Hold AGMs on Time

Introduction

The National Company Law Tribunal (NCLT), Mumbai Bench, has held that the offence of not holding Annual General Meetings (AGMs) within the stipulated time can be compounded, as the punishment under Section 99 of the Companies Act, 2013 is only a fine. The Bench clarified that Section 441 of the Companies Act contains no bar on compounding an offence punishable solely with a fine.

Factual Background

The Petitioner Company – NVENT THERMAL INDIA PRIVATE LIMITED – failed to hold AGMs on time due to an ongoing restructuring of its business. It submitted that the default did not cause any prejudice to the interest of members, creditors, or other stakeholders and that the directors had no malicious intent.

Procedural Background

The Petitioner Company and Mr. Ramesh B. Rotti (Director) filed a compounding application before the NCLT Mumbai Bench under Section 96 of the Companies Act, seeking compounding of the default.

Contentions of the Parties

• Petitioner’s Contentions: The Petitioner argued that the delay was caused due to business restructuring and requisite financial, legal, and operational due diligence. The company acknowledged the default and subsequently conducted the AGMs within the required time.
• Respondent’s Contentions: The Registrar of Companies (RoC) argued that the compounding application was defective as it was filed only by the Company and one director, without affidavits from other directors who had also committed the offence.

Tribunal’s Analysis

The Bench of Justice Ashish Kalia (Judicial Member) and Shri Sanjiv Dutt (Technical Member) observed that:

• Section 99 provides only for a fine as punishment.
• Section 441 expressly allows compounding of an offence punishable solely with a fine.
• There was no legal impediment to compounding in this case.

The Tribunal, considering the rectification of default by the Petitioner, found it appropriate to impose a compounding fee.

Reasoning & Analysis

The NCLT held that allowing compounding would serve as a deterrent against recurrence of such defaults, while also ensuring justice and fair play. The Tribunal emphasized that timely compliance with the Companies Act is essential to maintain corporate governance standards.

Implications

This ruling underscores that offences punishable solely with a fine can be compounded under Section 441, but companies must promptly rectify the default and approach the Tribunal without delay.

Outcome

The NCLT Mumbai Bench allowed the compounding application and directed payment of a compounding fee.