5 Key Changes introduced by the Companies Amendment Act, 2019 and their implications for India Inc. – Part II

In this post we discuss the changes introduced by the Companies (Amendment) Act, 2019 (“Amendment”) to Section 441 of the Companies Act, 2013 (“Act”) and its impact on the offences under the Act.

Section 441: Compounding of certain offences

One of the most significant changes brought by the Amendment have been to the compounding provisions under the Act.

Ø                                      For starters, the erstwhile Section 441 (1)(b) sated that the Regional Director (“RD”) or any other officer authorised by the central government may compound offences punishable by fine up to INR 5,00,000, which now stands increased to INR 25,00,000. This move which expands the jurisdiction of the RD, is expected to de-clog and significantly reduce the quantum of cases for compounding pending before the NCLT currently.

Ø                                      The other relevant change with respect to compounding of offences is in Section 441 (6). This Section, previously permitted the compounding of offences punishable under the Act with imprisonment or fine, or with imprisonment or fine or with both, subject to the permission of the Special Court. However, the amended provision puts a blanket and absolute restriction on compounding of any offence punishable under the Act with imprisonment only or with imprisonment and also with fine and makes such offences non-compoundable.

 

While on the surface, it appears to have been a move to bring in stricter laws for offences with even a chance of being punishable with imprisonment, making them non-compoundable, it would be interesting to note the impact that such a move would have on the efficiency of resolution of such matters, given that several offences under the Act carry penalties of imprisonment and all such offences have now become non-compoundable.