Compliance Management, Audit and Due Diligence · Non-Compliances, Penalties and Adjudications

Compounding of Offences under Section 441 and Condonation of Delay

Updated 11 October 2026 · Fact-checked

Compounding means settling an offence by paying a sum fixed by the Tribunal or Regional Director, so no prosecution follows. Under section 441, only offences not punishable with imprisonment can be compounded. Section 460 separately lets the Central Government condone delay in filing documents or applications. Apply through the Registrar.

Understand Compounding of Offences and Condonation of Default

A default under the Companies Act, 2013 can lead to prosecution in court. Compounding is a way out. The company or officer pays a sum to the Central Government, and the offence is treated as settled. Prosecution is avoided, or ends if it has already started.

Section 441 decides who can compound and which offences qualify. An offence can be compounded before or after prosecution starts. The compounding authority is either the Tribunal (NCLT), or the Regional Director (or an officer authorised by the Central Government). The Regional Director can act only where the maximum fine for the offence does not exceed ₹25 lakh.

Not every offence qualifies. Section 441(1) excludes offences punishable with imprisonment only, or with imprisonment and also with fine. Section 441(6) repeats this: such offences are not compoundable. So an offence with fine only, or an offence where imprisonment or fine is the alternative, can be compounded.

There are further limits. The sum fixed cannot exceed the maximum fine for the offence. It must take into account any additional fee already paid under section 403(2). If an investigation against the company has been initiated or is pending under the Act, the offence cannot be compounded. A repeat offence within three years of an earlier compounding cannot be compounded again.

Compounding is different from adjudication. Adjudication is a penalty imposed by an adjudicating officer after a hearing, for a default that carries a penalty. Compounding is a voluntary settlement of an offence on application. Condonation of delay under section 460 is a third idea: the Central Government may excuse a late application or a late filing with the Registrar, for reasons recorded in writing.

Key rules to remember

Offences that can be compounded: Compoundable = offence NOT punishable with imprisonment only, and NOT with imprisonment and also fine; Section 441(1) and 441(6). Fine-only offences, and those where the punishment is imprisonment or fine, qualify.
Who compounds: Tribunal: any compoundable offence. Regional Director / authorised officer: maximum fine ≤ ₹25 lakh; Section 441(1)(a) and (b). The Regional Director is an officer appointed by the Central Government.
Cap on the compounding sum: Sum specified ≤ maximum fine for the offence; First proviso to section 441(1). Additional fee paid under section 403(2) is taken into account.
No compounding during investigation: Investigation initiated or pending under the Act ⇒ no compounding; Third proviso to section 441(1).
Three-year bar: Similar offence within 3 years of earlier compounding ⇒ cannot compound; Section 441(2). An offence after three years from the earlier compounding is deemed a first offence.
Application route: Application → Registrar → (with comments) → Tribunal / Regional Director; Section 441(3)(a).
Intimation after compounding: Company informs Registrar within 7 days of compounding; Section 441(3)(b).
Effect of compounding: Before prosecution: no prosecution. After prosecution: Registrar tells court; offender discharged; Section 441(3)(c) and (d).
Non-compliance with filing direction: Maximum fine becomes twice the amount in the section creating the offence; Section 441(5), where an officer or employee fails to obey an order under 441(4).
Condonation of delay: Central Government may condone delay, for reasons recorded in writing; Section 460(a): late application to the Central Government. Section 460(b): late filing with the Registrar.

How to solve Compounding of Offences and Condonation of Default questions

Use this order for any problem on compounding or condonation. Answer in the format provision, facts, analysis, conclusion.

1Identify the offence and the section that creates it. Note the punishment: fine only, imprisonment only, or both.
2Test compoundability under section 441(1) and (6). If imprisonment is compulsory (imprisonment only, or imprisonment and fine), it is not compoundable. Stop there.
3Check the bars: investigation initiated or pending, and a similar offence compounded within the last three years.
4Fix the authority. Maximum fine up to ₹25 lakh: Regional Director or Tribunal. Above ₹25 lakh: Tribunal only.
5State the procedure: application to the Registrar, who forwards it with comments. Mention the cap on the sum and the credit for additional fee under section 403(2).
6If the default is a failure to file, mention the direction to file under section 441(4) and the doubled fine under 441(5) if it is ignored.
7State the effect and follow-up: no prosecution or discharge, and intimation to the Registrar within 7 days.
8If the question is about delay, bring in section 460 and say the Central Government condones for reasons recorded in writing.

Quickest way: Four-gate check

When to use it: Use when a short case asks whether an offence can be compounded.

Gate 1: Is imprisonment compulsory? If yes, not compoundable.
Gate 2: Is any investigation initiated or pending? If yes, not compoundable.
Gate 3: Was a similar offence compounded within 3 years? If yes, not compoundable.
Gate 4: Is the maximum fine ₹25 lakh or less? Regional Director or Tribunal. Otherwise Tribunal.
Then write: application via Registrar, sum capped at maximum fine, intimation within 7 days.

Common mistakes in Compounding of Offences and Condonation of Default

Saying every offence under the Act is compoundable.
Students remember that compounding avoids prosecution and assume it is general.
Fix: Always test the punishment first. Offences with imprisonment only, or imprisonment and also fine, are not compoundable under section 441(6).
Writing that the Regional Director can compound any offence.
The ₹25 lakh limit is forgotten.
Fix: Link the Regional Director to offences whose maximum fine does not exceed ₹25 lakh. Others go to the Tribunal.
Saying the application goes directly to the Tribunal or Regional Director.
Students skip the Registrar's role.
Fix: Under section 441(3)(a), the application is made to the Registrar, who forwards it with his comments.
Confusing compounding with adjudication of penalty.
Both end with a sum of money paid.
Fix: Compounding settles an offence on application, with court prosecution avoided. Adjudication is a hearing before an adjudicating officer that imposes a penalty.
Ignoring the three-year and investigation bars.
Students focus on the main rule and miss the provisos and sub-section (2).
Fix: Add both bars to every answer. Remember that an offence after three years is deemed a first offence.
Treating condonation under section 460 as part of compounding.
Both deal with defaults and delay.
Fix: Section 460 is a separate power of the Central Government to excuse delay in applications or filings. It does not settle an offence.

Worked examples

Example 1

Arjun Textiles Ltd failed to file a return with the Registrar in time. The offence is punishable with fine only, up to ₹5 lakh. No investigation is pending, and no earlier offence has been compounded. Advise on compounding and who can do it.

Show the solution

Provision: section 441 allows compounding of offences not punishable with imprisonment only, or with imprisonment and also fine.
Facts: the punishment is fine only, so the offence is compoundable.
Bars: no investigation is pending and no compounding in the last three years, so neither bar applies.
Authority: the maximum fine is ₹5 lakh, which does not exceed ₹25 lakh. Both the Regional Director and the Tribunal can compound.
Procedure: apply to the Registrar, who forwards it with comments. The authority may direct the company to file the return with the fee and additional fee under section 403 (section 441(4)). The sum specified cannot exceed ₹5 lakh, and additional fee paid is taken into account.
Follow-up: the company must inform the Registrar within 7 days of compounding.

Answer: The offence is compoundable. The Regional Director or the Tribunal may compound it on application through the Registrar. The sum cannot exceed ₹5 lakh, and the company must intimate the Registrar within 7 days.

Example 2

Meera Pharma Ltd and its director are being prosecuted for an offence that is punishable with imprisonment and also with fine. They apply to compound it. Can it be compounded? What if the offence were fine-only but an investigation is pending?

Show the solution

Provision: section 441(1) excludes offences punishable with imprisonment only, or with imprisonment and also with fine. Section 441(6) says such offences are not compoundable.
Facts: the offence carries imprisonment and also fine, so it is not compoundable, even after prosecution has begun.
Variation: if the offence were fine-only, it would normally qualify.
But the third proviso to section 441(1) bars compounding if an investigation against the company has been initiated or is pending under the Act.
So the pending investigation would stop compounding in the variation as well.

Answer: The first offence cannot be compounded because imprisonment with fine is not compoundable. In the variation, compounding is also barred while the investigation is pending.

Exam tips

Begin every compounding answer by testing the punishment. This single step earns the first marks.
Learn the ₹25 lakh threshold, the 7-day intimation and the 3-year bar as exact numbers.
Use the sequence provision, facts, analysis, conclusion, and name the section numbers 441 and 460 only where you are sure.
When asked to distinguish compounding from adjudication, write 3 or 4 points: nature, authority, how it starts, effect.
For practical drafting, write a short application via the Registrar, citing section 441 and stating the offence, the facts and the sum offered.

Practice questions from Non-Compliances, Penalties and Adjudications

Compounding of Offences and Condonation of Default in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

CA FinalCompounding of Offences (Section 138 and Rule 162)

Compounding of Offences and Condonation of Default: frequently asked questions

Which offences cannot be compounded under the Companies Act, 2013?

Offences punishable with imprisonment only, or with imprisonment and also with fine, cannot be compounded (section 441(1) and (6)). Offences cannot be compounded while an investigation against the company is pending. Nor can a similar offence be compounded within three years of an earlier compounding.

Who can compound an offence?

The Tribunal can compound any compoundable offence. The Regional Director, or an officer authorised by the Central Government, can do so where the maximum fine does not exceed ₹25 lakh.

What is the difference between compounding and adjudication?

Compounding is a settlement of an offence, on application, by paying a sum fixed by the Tribunal or Regional Director. Adjudication is a hearing by an adjudicating officer that results in a penalty. Compounding prevents or ends prosecution of an offence.

What does section 460 do?

It lets the Central Government condone delay in making an application to it, or in filing a document with the Registrar. The Government must record its reasons in writing. It is a separate power from compounding.