- (1.) This Application was filed before the Company Law Board, Southern Region, Chennai under Section 621A of the Companies Act, 1956 for compounding of offence for violation under section 149(1) of the Companies Act, 2013 which is punishable under section 172 of the Companies Act, 2013. This Application was filed through the Registrar of Companies, Karnataka at Bangalore. This Application was received from the Registrar of Companies. Karnataka at Bangalore by the Company Law Board, Southern Region, Chennai and it was transferred to this Tribunal on abolition of Company Law Board, Southern Region, Chennai Bench and numbered as T.P. No. 264/2016 on the file of this Tribunal. The averments in the Company Application are briefly described hereunder:-- The 1st Applicant is the Company, 2nd Applicant is a Managing Director, 3rd Applicant is the Chief Financial Officer and 4th Applicant is the Company Secretary. This suo motu Application is filed by all the Applicants for compounding of violation under section 149 of the Companies Act, 2013 hereinafter referred to as an Act which is punishable under section 172 of the Act. The Applicant Company was incorporated under the Companies Act, 1956 on 24th April 2000, in the name and style of TEJAS NETWORKS INDIA PRIVATE LIMITED, company has changed its name to TEJAS NETWORKS INDIA LIMITED with effect from 23rd October 2002 and again the company has changed its name to TEJAS NETWORKS LIMITED w.e.f. 18th March 2008, vide Registration No. CIN-U72900KA2000PLC026980. The Registered office of the company is situated at Plot No. 25, 5th Floor, J.P. Software Park, Electronic City, Phase-I, Hosur Road, Bangalore-560100. The Main objects of the Applicant Company is to engage in the business of providing, designing, developing, selling, and servicing of networking equipment and software in India and abroad; to develop, manufacture and deal in application tools of all kinds for internet based applications, and to provide internet service, and deal with all kinds of software and hardware related to all fields to internet communication; to develop, manufacture, deal in, export and import all kinds of computer software, application software, computer systems like data management systems, digital systems etc. It is averred that, as per second Proviso to sub-section (1) of section 149 of the Act read with Rule 3 of the Companies (Appointment of Directors) Rules, 2014 that, every other public company having paid up share capital of Rs. 100 crore or more or turnover of Rs. 3 crore or more, the company being a public limited company, is required to appoint a woman Director on the board within one year from the date of commencement of section 149 of the Act which came into force from 1st April 2014. Therefore, the 1st Applicant Company was required to appoint woman Director by 31st March 2015, as its paid up capital was Rs. 100,97,92.400/- and the turnover was Rs. 361,95,07,794/- for the financial year 2014-15. The Company was unable to identify a suitable person for the post of woman Director due to specialized/technological nature of business of the Company. However, the company was able to identify a suitable person for appointing as woman Director. In the meantime, the Registrar of Companies, Karnataka at Bangalore issued show cause notice dated 6th July 2015 seeking the explanation for non-compliance. However, the 1st Applicant Company gave reply on 15th July 2015 to the show cause notice seeking extension of time for appointment of woman Director to the Board of the Company. On the other hand, the Registrar of Companies, Karnataka at Bangalore instituted the prosecution against the 1st Applicant Company and its officers who are in default before Special Court for Economic Offence at Bangalore. The 1st Applicant Company however, appointed woman Director on 16th February 2016. It is averred that violation of second proviso to sub-section (1) of section 149 of the Act read with Rule 3 of the Companies (Appointment of Directors) Rules, 2014 was neither willful nor an act of negligence. The 1st Applicant Company had sincerely tried to get a suitable candidate to appoint as Woman Director. Based on the recommendations of the Nomination and Remuneration Committee, the Board of Director of the 1st Applicant Company appointed Ms. Leela K. Ponappa as Woman director and also as Independent Director on the Board w.e.f. 16th February, 2016. Thus there was compliance of Second Proviso to sub-section (1) of section 149 of the Act read with Rule 3 of the Companies (Appointment of Directors) Rules, 2014.
(2.) The Practicing Company Secretary has made written submission on 8th August 2016 that:-- (1) Section 621A of the Companies Act, 1956 under which this compounding application (the application) was moved before the Hon'ble Company Law Board (CLB) in the month of March 2016 allows the filing of compounding application before the CLB either before or after the institution of any prosecution. (2) The application was moved before CLB after seeking the permission from the special court. (3) Before filing the compounding application, the offence was made good by appointing the woman director Ms. Leela K. Ponnappa. She is an Independent Director appointed for 5 years. Ms. Leela K. Ponappa who joined Indian Foreign Services in the year 1970 held as various positions in government of India, like Ambassador to Netherlands, Thailand and Permanent Representative of India to UNESCAP, Additional Secretary, Joint Secretary to the various Ministries. It is further averred that, violation can be compounded taking lenient view.
(3.) We have heard the Practicing Company Secretary for Applicants, it is contended that the present Application for compounding filed under section 621A of the Companies Act, 1956 is maintainable even though prosecution is launched against the Applicants. It is contended there is no bar under law to compound the offence by the Company Law Board which was abolished after constitution of National Company Law Tribunal. It is contended that, the violation is punishable with fine only under section 172 of the Act. Since violation is not punishable with imprisonment or imprisonment and fine, the Tribunal can compound the violation under section 172 of the Act. It is contended that, even though the prosecution was launched against the Applicants, the violation can be compounded by the Tribunal and no permission is required from the Special Court for Economic Offence at Bangalore. In this connection, the Practicing Company Secretary for Applicants has relied on the decision of the Company Law Board in Hoffland Finance Ltd. In re, 1997 13 SCL 12(Delhi) and contended that, exercise of power by the Company Law Board under section 621A(1) of the Companies Act, 1956 is independent of exercise of powers by the court under sub-section (7), and all offences other than those which are punishable with imprisonment only or with imprisonment and also fine, can, be compounded by the Company Law Board without any reference to sub-section (7), even in cases where the prosecution is pending in a criminal court. It is contended that the offence can be compounded by the Tribunal even if prosecution is pending against the Applicants.;