March 11, 2002
‘7’
COMPOUNDING OF OFFENCE UNDER COMPANIES ACT
The Department of Company Affairs (DCA) has said that there is no legal bar for composition of an offence under Section 621A of the Companies Act, 1956, provided the conditions specified in the Section and guidelines, if any, are fulfilled. In this connection, the DCA has directed all the Regional Directors (RDs) and Registrars of Companies (ROCs) that the provisions of Section 446 of the Companies Act do not bar criminal proceedings against the directors of the company for any offences committed under the Companies Act and the offences are compoundable under Section 621A of the Companies Act.
The clarification to RDs and ROCs follows revelations in some of the inspections whether the offences committed by directors of a company can be compounded under Section 621A of the Companies Act when the company in which they were directors is under liquidation without obtaining the leave of the Company Court under Section 446 of the Companies Act.
The issue, which has been examined in consultation with the Ministry of Law, is further clarified that where the penal provisions provide for proceedings against the companies also and if the offences are compoundable under Section 621A of the Companies Act, compounding will not be permissible against the company in view of the provisions of Section 446 of the Companies Act.