In the recent case before the NCLAT, the Appellant claimed that the Respondent is liable for the minimum fine prescribed for the violation under Section 165 (6) of the Companies Act, 2013, but the Tribunal has imposed compounding fees instead, totalling Rs. 50,000, which is less than the minimum fine prescribed under Section 165 (6) of the Companies Act, 2013.
In the instant case titled The Registrar of Companies, West Bengal vs. Karan Kishore Samtani the issue raised for clarification before the NCLAT was:
In accordance with Section 441 (1) of the Companies Act of 2013, can the tribunal impose compounding costs that are lower than the minimum fine set forth for the offence under Section 165 (1) read in conjunction with Section 165(6) of the Companies Act of 2013?
With regard to this issue for the period of 01.04.2015 to 28.12.2015, the Respondent breached the provisions of Section 165(1) read with Section 165(3) of the Companies Act, 2013, which is punishable under Section 165(6) of the Act, according to the NCLAT. Compounding fees have been set by the NCLT, Kolkata bench at Rs. 50,000, which is less than the minimum amounts required by Section 165(6) of the Companies Act of 2013.
As a result, the NCLAT determined that the NCLT, Kolkata Bench had neglected to take into account the applicable minimum fine set forth in Section 165, subsection 6, of the Companies Act of 2013, at the relevant time.
The NCLAT categorically stated that,
“However, we do not agree with such submission in view of the provision as quoted above, which prescribes a minimum penalty. The legislature has prescribed a minimum fine, which shall not be less than five thousand rupees for every day and a maximum fine of twenty-five thousand rupees for every day, the Tribunal has no jurisdiction to reduce the fine to less than the minimum fine prescribed for the offence."
Moreover, the provisions of Section 165(1) of the Companies Act of 2013 have been violated by the Respondent, and this is a violation that is penalised by Subsection 6 of Section 165 of the Companies Act of 2013. Given the relevant facts and circumstances, the NCLAT imposed a minimum fine of 5000 rupees for each day from April 1, 2015, to February 21, 2016, or 272 days. The NCLAT calculated the fine to be Rs. 13,60,000. After adjustment, the Respondent owes Rs. 13,10,000/- despite having already paid Rs. 50,000. As a result, the National Company Law Tribunal in Kolka orders the Respondent to pay the amount within 60 days.