What is Compounding?
Compounding refers to a process where the complainant agrees to withdraw a complaint filed against the accused after mutual agreement. Both parties then submit a joint application to the appropriate authority (Tribunal, Regional Director, or Court) requesting that the matter not be pursued further.

Definition of “Offence”

Under Section 3(38) of the General Clauses Act, 1897, an offence means any act or omission made punishable by law. The Companies Act, 2013 does not explicitly define the term “offence.”

What is a Compoundable Offence?

Offences under the Companies Act, 2013 that are:

1. Punishable with fine only, or
2. Fine or imprisonment or both

 

Examples:

Failure to file documents Non-compliance with procedural aspects of the Act

Types:

1. Without court permission – Lesser offences (e.g. defamation, trespass)
2. With court permission – More serious (e.g. theft, grievous hurt)

 

What is a Non-Compoundable Offence?

Offences punishable:

1. With imprisonment only, or
2. With both imprisonment and fine

These cannot be settled through compounding and must go through the judicial process.

 

Relevant Provision: Section 441 – Compounding of Certain Offences:

Who Can Compound:

1. National Company Law Tribunal (NCLT)
2. Regional Director (RD) or officer authorized by the Central Government
3. Special Court

 

Compounding Conditions:

Allowed only after payment of the penalty Amount shall not exceed the maximum fine for the offence

 

Procedure for Compounding:

1. Application submitted to Registrar of Companies (RoC)
2. RoC adds comments and forwards to RD/NCLT/Authorized Officer
3. Company must inform RoC within 7 days of compounding order
4. If compounded before prosecution – no prosecution will be initiated

 

When Compounding is NOT Allowed:

1. If offence is punishable with imprisonment only, or imprisonment + fine
2. If an investigation is initiated or pending
3. If a similar offence was compounded within the past 3 years

Penalty for Non-Compliance with Compounding Order:

1. Fine up to ₹1,00,000
2. Imprisonment up to 6 months
3. Or both