Death Of Shareholder Led To AGM Default, NCLT Mumbai Compounds Offence, Cuts Fine To ₹1.16 Lakh

Holding that the default occurred on account of the death of a shareholder, the National Company Law Tribunal (NCLT), Mumbai, has compounded the offence arising from the delay in holding the Annual General Meeting of Dighi Agencies Private Limited for FY 2016–17.

A coram of Judicial Member Lakshmi Gurung and Technical Member Hariharan Neelakanta Iyer imposed a total compounding fee of Rs. 1.16 lakh, as against the maximum fine computed by the Registrar of Companies at over Rs. 1.63 crore.

The tribunal said it was “inclined to entertain the present petition for compounding of offence under section 96 of the Companies Act,” while considering the plea filed by the company and its directors.

The company had failed to hold its AGM within the statutory deadline after the death of one of its two shareholders, which resulted in the absence of the requisite quorum. The company also stated that issues relating to transmission of shares of the deceased shareholder prevented compliance.

The petitioners contended that the default was neither intentional nor wilful, but occurred due to genuine and unavoidable circumstances.

Relying on the ruling in Pahuja Takii Seed Ltd. & Ors. v. Registrar of Companies, the Tribunal entertained the petition for compounding, noting that the appellate tribunal had held that there are no pecuniary fetters on the NCLT's powers under Section 441 of the Companies Act.

Noting that the company had been regular in its subsequent statutory filings and that the offence was a first-time default arising due to the death of one of its shareholders, the tribunal observed that “it would be commensurate to levy the compounding fee” in the facts of the case.

While the Registrar of Companies had computed the maximum fine at over Rs. 1.63 crore for the company and its directors, the Tribunal imposed a substantially reduced compounding fee of Rs 1,16,300 in total.

The tribunal directed the company and its directors to deposit the compounding amounts within 30 days, failing which the Registrar of Companies would be at liberty to initiate prosecution in accordance with the law.

It further clarified that upon timely payment, the offence shall stand compounded.