NCLAT | Company and its directors to be treated equally while imposing fine for delay in filing Cost Audit Report

National Company Appellate Tribunal (NCLAT): A Bench of Justice S.J. Mukhopadhaya, Chairperson and Justice A.I.S. Cheema, Member (Judicial) held that the company and the directors have to be treated equally while imposing fine for delay in filing Cost Audit Report.

The appeal was filed against the order of National Company Law Tribunal (New Delhi). There was a delay in filing of Cost Audit Report by the defaulting Company for the years 2013-14, 2014-15 and 2015-16. The Registrar of Companies initiated prosecution under Section 233-B(11) of the Companies Act, 1956. The Company moved an application for compounding of offence. However, NCLT imposed fine on the Company as well as its directors.

Ankit Totuke, Advocate appearing for the appellants argued that NCLT imposed maximum fine of Rs 1 lakh on the directors as prescribed under Section 148(8) read with 147(1) of the Companies Act, 2013. However, in contrast, the fine imposed on the Company was only 20% of the maximum fine, i.e. only Rs 1 lakh out of a maximum of Rs 5 lakhs.

The Appellate Tribunal perused the relevant provision in this regard, viz. Section 147(1) of the Companies Act, 2013 and stated, “Considering the above provision and the fine as imposed we find substance in the argument of the learned counsel for the appellants that the Company and the Directors have not been treated equally.”

Therefore, the High Court modified the impugned order and reduced the fine imposed on the directors to 20% of the maximum fine. [Goyal Vegoils Ltd. v. Registrar of Companies, 2019 SCC OnLine NCLAT 149, decided on 19-03-2019]

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