Compounding of Offences under the Companies Act, 2013

Section 441 of the Companies (Amendment) Act, 2017 was notified w.e.f. 9^th February, 2018.

Table shows a comparison of Revised Provisions v/s Previous Provisions.   

Type of Penalty	Previous scenario	Existing/New provisions
Fine	If penalty < 5 lakhs-RD If penalty ≥ 5 Lakhs – tribunal	If penalty < 5 lakhs – RD If penalty ≥ 5 Lakhs – tribunal
Imprisonment OR Fine	Compoundable with special court permission	If penalty < 5 lakhs – RD If penalty ≥ 5 Lakhs – tribunal
Imprisonment	Non Compoundable	Non Compoundable
Imprisonment AND Fine	Non Compoundable	Non Compoundable

Due to this amendment, NCLT has got the power to compound the offences whose penalty is imprisonment or fine (earlier only fine).  

However, as per Section 441(6) of the Companies Act, 2013, approval of special court is required for compounding offences punishable with imprisonment or fine, or with imprisonment or fine or with both. 

Does it mean to compound the offences; permission of special court is required?  

This anomaly was resolved by the Supreme Court judgement dated 10^th May, 2013, passed in VIS Finance vs. Union of India, wherein it was held that prior permission of the Court is not necessary for compounding of offence, when power of compounding is exercised by the Company Law Board. (Now NCLT)