Compoundable offence

This query is : Resolved 

24 May 2011

What is meant by compounding of an offence?

CMA. CS. Sanjay Gupta (Expert)

24 May 2011

Offences under the Companies Act, 1956 are compoundable unless the offence in question invites imprisonment as a mandatory part of the prescribed punishment. [Section 621A]

The following offences are compoundable:

*Offences punishable with fine only;
*Offences punishable with fine or imprisonment;
*Offences punishable with fine or imprisonment or both.

In short it means settlement.

Also see below link for details---

CMA. CS. Sanjay Gupta (Expert)

24 May 2011

Reason for preference for compounding the offence

Companies and their officer in default, like to compound the offences rather than to face prosecution in a Criminal Court mostly for the following reasons:—

(1) The delinquent officers of the company have to appear before the Magistrate at every hearing.They have to get permission from the Magistrate by making an application under section 205 of the Criminal Procedure Code, for dispensing with personal attendance at every hearing and permit them to appear by their pleaders.
(2) Companies have to engage an advocate for appearing before the Criminal Court.
(3) In case the accused is a Managing Director, his re-appointment requires approval of the Central Government, if he is levied a fine of more than1,000 by the Criminal Court.
(4) Court proceedings are generally expensive and time consuming.
(5) Even if the accused gets acquittal, the Central Government may file an appeal against the order exercising its powers under section 624B of the Act.
(6) Quick relief can be obtained from the Central Government.
(7) The delinquent officer will be examined by the company prosecutor in the open Court.

Mayuri Jain (Querist)
25 May 2011

But what is the actual procedure of compounding the offence?

CMA. CS. Sanjay Gupta (Expert)

25 May 2011

Procedure for making an application for compounding of an offence

The company or the officers thereof desirous for compounding of an offence should make an application to the Registrar of Companies in new e-Form 61 as prescribed by the Notification No. GSR
56(E), dated 10th February, 2006. The following essential information should be furnished in the application:—
1. company's name, registration no. and date of its incorporation;
2. status of the company such as whether, it is a public company or a private company or a section 25 company;
3. status of the applicant;
4. capital structure of the company with the details of the authorised, issued, subscribed and paid up capital;
5. address of the company's registered office;
6. nature of the offence and background of the alleged offence/violation/default;
7. situation or circumstances leading to the alleged offence;
8. pleading absence of mens rea;
9. the date on which or the period during which the offence was committed;
10. admitting the commission of offence;
11. whether the default or violation was made good before or at the time of making the compounding application;
12. confirmation that the alleged offence is a first offence and it is not a second offence in 3 years;
13. requirement for passing of the Board resolution for making application for compounding of offence;
14. prayer for compounding the offence;
15. request for reducing the fine.

CMA. CS. Sanjay Gupta (Expert)

25 May 2011

Specimen of resolution for authorising to make application for compounding of an offence:

RESOLVED THAT an application be made to the Registrar of Companies pursuant to clause (a) of sub-section (4) of section 621A of the Companies Act, 1956 for compounding the offence for which prosecution has been filed with the request to forward the same to the Central Government for necessary action.

RESOLVED FURTHER THAT Mr. IJ, Managing Director of the Company be and is hereby authorised to file/move/present before appropriate Court, Central Government and/or such other judicial/quasi judicial and/or administrative authority(ies) as may be deemed appropriate and advised to by the legal counsels such petitions/ application including any application for compounding on behalf of the Company, in connection with the show cause notice issued by the Registrar of Companies for violation of provisions of the Companies Act, 1956 and any penal proceedings /complaint initiated or may be initiated against the Company and/or directors /officials of the Company, and further verify, sign, affirm, submit the said petitions/applications including affidavits and other statements forming part of such petitions/applications.

CMA. CS. Sanjay Gupta (Expert)

25 May 2011

Also remember In case of more than one officer of the company desirous to compounding of an offence, separate application in the e-Form 61 has to be filed by each person even for compounding of the same offence.


For compounding of offences, e-Form 61 shall be attached with the following documents:
(1) Power of attorney/memorandum of appearance as per Form 5 of Company Law Board Regulations, 1991 if the application is filed for compounding of offence.
(2) Affidavit verifying the content of application if the application is filed for compounding of offence.
(3) The detailed application will be as per Company Law Board Regulations, 1991 covering following details:
(i) General profile and history of the company containing details such as name, date of incorporation, main objects of the company
(ii) Facts of the case mentioning nature of offence and period of default
(iii) Whether the offence is made good, if yes, then how and when (i.e. the date where applicable)
(iv) Prayer to compounding authority for compounding of offence
(4) Certified copy of the Memorandum and Articles of Association
(5) Certified copy of the Balance Sheet and Profit and Loss Accounts of the Company.
(6) Any other information can be provided as an optional attachment.

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