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CS Professional · Drafting, Pleadings and Appearances · Applications, Petitions and Appeals under Companies Act, 2013

Epsilon Ltd seeks compounding of a default for which the maximum fine is Rs 5 lakh. An investigation against the company under the Act is pending. Which statement is correct?

The offence cannot be compounded while the investigation against the company is pending. The proviso to section 441(1) bars compounding in that situation, even though the fine is well below the Regional Director's Rs 25 lakh limit.

  1. AThe Regional Director may compound it, as the fine is below Rs 25 lakh
  2. BThe offence cannot be compounded while the investigation is pendingCorrect
  3. CIt may be compounded only if the company pays twice the fine
  4. DIt may be compounded only after prosecution has been instituted

Explanation

The third proviso to section 441(1) says an offence covered by the sub-section by a company or its officer shall not be compounded if investigation against the company has been initiated or is pending under the Act. The low fine amount does not override this bar. Compounding is allowed before or after prosecution, so the last option is wrong.

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