11

COMPOUNDING OF
OFFENCES, ADJUDICATION
AND SPECIAL COURTS
LEARNING OUTCOMES
At the end of this Chapter, students will be able to –
 Understand the types of penalties that can be levied for the commission
of an offence under this Act.
 Know the compoundable and non-compoundable offences.
 Identify the establishment of special courts and its Jurisdiction.
 Know of the procedure of appeal and revision.
 Know about the Mediation and Conciliation Panel.
 Know of the power of Central Government to appoint company
prosecutors, provisions related to appeal against acquittal,
compensation for accusation and application that can be applied for
imposing of fine.
 Explain the procedure related to adjudication of penalties.

1. INTRODUCTION
An offence is a commission of an act which is contrary to any law or forbidden by the law and is
not confined to commission of crime only. Such commission of act against the law requires a
particular punishment levied through the way of penalty.

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 11.2 CORPORATE AND ECONOMIC LAWS

TYPES OF PENALTIES
There are five types of penalties that can be levied on the commission of the offences that have
been contemplated under the Companies Act, 2013. They are as follows:

Penalties

Imprisonment
Imprisonment Imprisonment Imprisonment
Fine only or fine or with
or Fine and fine only
both

Penalties levied on offences are Penalties levied on offences are Non-

Compoundable Compoundable

Compoundable offences are those offences where, the complainant (one who has filed the case)
enters into a compromise, and agrees to have the charges dropped against the accused.
Non-Compoundable offences are those which are not compoundable because of grievous nature
of offence.

2. ESTABLISHMENT OF SPECIAL COURT [SECTION 435]

Section 435 of the Companies Act deals with the establishment of the Special Court. The
provisions state the number of special court that may be established with the required number of
judges for the working.
Establishment of number of special court: The Central Government may by notification-
• for the purpose of providing speedy trial of offences under this Act 1except under
section 452
• establish or designate as many Special Courts as may be necessary.
A Special Court shall consist of—

a single judge holding office as Session in case of offences punishable under this
Judge or Additional Session Judge Act with imprisonment of two years or more;
and

1 Amended by the Companies (Amendment) Act, 2020 w.e.f from 22nd January 2021

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COMPOUNDING OF OFFENCES, ADJUDICATION AND SPECIAL COURTS 11.3

a Metropolitan Magistrate or a Judicial in the case of other offences

Magistrate of the First Class

who shall be appointed by the Central Government with the concurrence of the Chief Justice of the
High Court within whose jurisdiction the judge to be appointed is working.

3. OFFENCES TRIABLE BY SPECIAL COURTS [SECTION 436]

(1) Powers of special courts with respect to trial of offences: Notwithstanding anything
contained in the Code of Criminal Procedure (Cr. P. C), 1973,—

Powers of the special courts Provisions

Offences triable by the special All offences specified under section 435(1) shall be
court triable only by the Special Court established for the
area in which the registered office of the company in
relation to which the offence is committed.
In case of more than one Special Where there are more Special Courts than one for
Courts such area, by such one of them as may be specified
in this behalf by the High Court concerned;
Where a person accused of, or Such person is forwarded to a Magistrate under
suspected of the commission of, section 167 of the Code of Criminal Procedure, 1973.
an offence under this Act (i) such Magistrate may authorise the detention of
such person in such custody as he thinks fit for a
period not exceeding fifteen days in the whole
where such Magistrate is a Judicial Magistrate,
(ii) and seven days in the whole where such
Magistrate is an Executive Magistrate:
Provided that where such Magistrate considers that
the detention of such person (upon or before the
expiry of the period of detention) is unnecessary, he
shall order such person to be forwarded to the
Special Court having jurisdiction;
Vested with same power as the Special Court may exercise the same power which
provided under the Cr. P.C a Magistrate having jurisdiction to try a case may
exercise under section 167 of the Code of Criminal
Procedure, 1973 in relation to an accused person who
has been forwarded to him under that section;
Cognizance of offence by special A Special Court may, upon perusal of the police
court report of the facts constituting an offence under this

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 11.4 CORPORATE AND ECONOMIC LAWS

Act or upon a complaint in that behalf, take

cognizance of that offence without the accused being
committed to it for trial.

(2) Special Court to try an offence other than an offence under this Act: When trying an
offence under this Act, a Special Court may also try an offence other than an offence under
this Act with which the accused may, under the Code of Criminal Procedure, 1973 be
charged at the same trial.
(3) Summary Trial: Notwithstanding anything contained in the Code of Criminal Procedure, 1973,
Power of special court on summary Nature of summary trial
trial of an offence
The Special Court may, if it thinks fit, try Which is punishable with imprisonment for a
in a summary way any offence under term not exceeding three years
this Act
In the case of conviction in a summary trial no sentence of imprisonment for a term
exceeding one year shall be passed
When at the commencement of, or in the the Special Court shall, after hearing the
course of, a summary trial, it appears to parties, record an order to that effect and
the Special Court that – thereafter recall any witnesses who may have
• the nature of the case is such that been examined and proceed to hear or rehear
the sentence of imprisonment for a the case in accordance with the procedure for
term exceeding one year may have the regular trial.
to be passed, or
• that it is, for any other reason,
undesirable to try the case
summarily

4. APPEAL AND REVISION [SECTION 437]

The High Court may exercise, so far as may be applicable, all the powers conferred by Chapters
XXIX and XXX which deals with appeals, Reference and Revision of the Code of Criminal
Procedure, 1973 on a High Court-
As if a Special Court within the local limits of the jurisdiction of the High Court were a Court of
Session trying cases within the local limits of the jurisdiction of the High Court.

5. APPLICATION OF CODE TO PROCEEDINGS BEFORE

SPECIAL COURT [SECTION 438]
Save as otherwise provided in this Act, the provisions of the Code of Criminal Procedure, 1973
shall apply to the proceedings before a Special Court and for the purposes of the said provisions,

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COMPOUNDING OF OFFENCES, ADJUDICATION AND SPECIAL COURTS 11.5

the Special Court shall be deemed to be a Court of Session or the court of Metropolitan Magistrate
or a Judicial Magistrate of the First Class, as the case may be, and the person conducting a
prosecution before a Special Court shall be deemed to be a Public Prosecutor.

6. OFFENCES TO BE NON-COGNIZABLE [SECTION 439]

This sections provides of the offences that are non-cognizable. According to this section:

Offence Nature of offence

Every offence under the Companies Act, 2013 shall be deemed to be non-cognizable within
except the offences referred to section 212(6) the meaning of the Cr.P.C

Court shall take cognizance of any offence Only on the written complaint of the
under the Companies Act which is alleged to Registrar, a shareholder or a member of the
have been committed by any company or any company, or of a person authorised by the
officer thereof Central Government in that behalf. [Section
439(2)]
Cognizance of offences relating to issue and The court may take cognizance on a
transfer of securities and non-payment of complaint in writing, by a person authorised
dividend by the Securities and Exchange Board of
India. [Section 439(2)]
Non-application of section 439(2) To a prosecution by a company of any of its
officers
Where the complainant is the Registrar or a The presence of such officer before the Court
person authorised by the Central Government trying the offences shall not be necessary
unless the court requires his personal
attendance at the trial
Non-application of section 439(2) To any action taken by the liquidator of a
company in respect of any offence alleged to
have been committed in respect of any of the
matters in Chapter XX (Winding up) or in any
other provision of this Act relating to winding
up of companies.
The liquidator of a company shall not be
deemed to be an officer of the company.

As per the Notification G.S.R. 463(E) dated 5th June 2015, in case of a government companies,
court shall take cognizance of an offence under this Act which is alleged to have been committed
by any company or any officer thereof on the complaint in writing of a person authorized by the
Central Government in that behalf

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 11.6 CORPORATE AND ECONOMIC LAWS

Explanation: Cognizable offence means an offence in which a police officer has the authority to
make an arrest without a warrant and to start an investigation with or without the permission of a
court. Cognizable offences are usually those offences which are serious in nature.
Whereas non-cognizable offence means an offence for which, and ‘non-cognizable case’ means a
case in which, a police officer without any warrant has no authority to arrest.

7. TRANSITIONAL PROVISIONS [SECTION 440]

According to the section, any offence committed under this Act, which is triable by a Special Court
shall, until a Special Court is established, be tried by Court of Session or the court of Metropolitan
Magistrate or a Judicial Magistrate of the First Class, as the case may be, exercising jurisdiction
over the area, notwithstanding anything contained in the Code of Criminal Procedure, 1973:
Provided that nothing contained in this section shall affect the powers of the High Court under
section 407 of the Code to transfer any case or class of cases taken cognizance by a Court of
Session or the court of Metropolitan Magistrate or a Judicial Magistrate of the First Class, as the
case may be, under this section.

8. MEDIATION AND CONCILIATION PANEL [SECTION 442]

(1) Mediation and Conciliation Panel: The Central Government shall maintain a panel of
experts to be called as the Mediation and Conciliation Panel.
Composition: It shall be consisting of such number of experts having such qualifications as
may be prescribed for mediation between the parties during the pendency of any
proceedings before-
• the Central Government or
• the Tribunal or
• the Appellate Tribunal under this Act.
(2) Referring of matters by any parties to the proceedings to Mediation and Conciliation
Panel: Any of the parties to the proceedings may, at any time during the proceedings
before the Central Government or the Tribunal or the Appellate Tribunal, apply to
the Central Government or the Tribunal or the Appellate Tribunal, as the case may be, in
such form along with such fees as may be prescribed, for referring the matter pertaining to
such proceedings to the Mediation and Conciliation Panel and the Central Government or
Tribunal or the Appellate Tribunal, as the case may be, shall appoint one or more experts
from the panel referred to in sub-section (1).
(3) Suo moto referring of matters to Mediation and Conciliation Panel: The Central
Government or the Tribunal or the Appellate Tribunal before which any proceeding is
pending may, suo moto, refer any matter pertaining to such proceeding to such number of

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COMPOUNDING OF OFFENCES, ADJUDICATION AND SPECIAL COURTS 11.7

experts from the Mediation and Conciliation Panel as the Central Government or the
Tribunal or the Appellate Tribunal, as the case may be, deems fit.
(4) Fees and other conditions of experts: The fee and other terms and conditions of experts
of the Mediation and Conciliation Panel shall be such as may be prescribed.
(5) Procedure and disposal of matter: The Mediation and Conciliation Panel shall follow such
procedure as may be in Rule 11 and 19 of the Companies (Mediation and Conciliation)
Rules, 2016, and dispose of the matter referred to it within a period of three months from
the date of appointment of expert from the panel and forward its recommendations to the
Central Government or the Tribunal or the Appellate Tribunal, as the case may be.
(6) Objection to the recommendation of the Mediation and Conciliation Panel: Any party
aggrieved by the recommendation of the Mediation and Conciliation Panel may file
objections to the Central Government or the Tribunal or the Appellate Tribunal, as the case
may be.

9. POWER OF CENTRAL GOVERNMENT TO APPOINT

COMPANY PROSECUTORS [SECTION 443]
The Central Government may appoint one or more persons, as company prosecutors for the
conduct of prosecutions arising out of this Act,
• generally, or
• for any case, or
• in any case, or
• for any specified class of cases in any local area,
The persons so appointed as company prosecutors shall have all the powers and privileges
conferred by the Code on Public Prosecutors appointed under section 24 of the Code.

10. APPEAL AGAINST ACQUITTAL [SECTION 444]

The Central Government may, in any case arising under this Act, direct any-
• company prosecutor or
• authorise any other person either by name or by virtue of his office,
to present an appeal from an order of acquittal passed by any court, other than a High Court, and
an appeal presented by such prosecutor or other person shall be deemed to have been validly
presented to the appellate court.

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 11.8 CORPORATE AND ECONOMIC LAWS

11. COMPENSATION FOR ACCUSATION WITHOUT

REASONABLE CAUSE [SECTION 445]
The provisions of section 250 of the Code of Criminal Procedure, 1973 shall apply mutatis
mutandis to compensation for accusation without reasonable cause before the Special Court or the
Court of Session.

12. APPLICATION OF FINES [SECTION 446]

According to this section, the court imposing any fine under this Act may direct that the whole or
any part thereof shall be applied in or towards payment of the costs of the proceedings, or in or
towards the payment of a reward to the person on whose information the proceedings were
instituted.

13. FACTORS FOR DETERMINING LEVEL OF

PUNISHMENT [SECTION 446A]
According to this section, the Court or the Special Court, while deciding the amount of fine or
imprisonment under this Act, shall have due regard to the following factors, namely:—

(a) size of the company;

(b) nature of business carried on by the company;
(c) injury to public interest;
(d) nature of the default; and
(e) repetition of the default.

14. LESSER PENALTIES FOR ONE PERSON COMPANIES

OR SMALL COMPANIES [SECTION 446B]
2According to this section, notwithstanding anything contained in this Act, if penalty is
payable for non-compliance of any of the provisions of this Act by a One Person Company,
small company, start-up company or Producer Company, or by any of its officer in default,
or any other person in respect of such company, then such company, its officer in default
or any other person, as the case may be, shall be liable to a penalty which shall not be more
than one-half of the penalty specified in such provisions subject to a maximum of two lakh

2 Substituted by the Companies (Amendment) Act, 2020 w.e.f. 22nd January 2021

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COMPOUNDING OF OFFENCES, ADJUDICATION AND SPECIAL COURTS 11.9

rupees in case of a company and one lakh rupees in case of an officer who is in default or
any other person, as the case may be.
Explanation.—For the purposes of this section-
(a) "Producer Company" means a company as defined in clause (l) of section 378A;
(b) "start-up company" means a private company incorporated under this Act or under
the Companies Act, 1956 and recognised as start-up in accordance with the
notification issued by the Central Government in the Department for Promotion of
Industry and Internal Trade.

15. ADJUDICATION OF PENALTIES [SECTION 454]

(1) The Central Government may, by an order published in the Official Gazette, appoint as
many officers of the Central Government, not below the rank of Registrar, as adjudicating
officers for adjudging penalty under the provisions of this Act in the manner as provided in
Rule 3 of the Companies(Adjudication of Penalties) Rules, 2014.
Manner of adjudication of Penalties [Rule 3 of the Companies (Adjudication of
Penalties) Rules, 2014]
(i) 3Appointment of Adjudicating officers: The Central Government may appoint any
of its officers, not below the rank of Registrar, as adjudicating officers for adjudging
penalty under the provisions of the Act.
(ii) Issue of written notice by an adjudicating officer: Before adjudging penalty, the
adjudicating officer shall issue a written notice in the *specified manner-
• to the company and
• to officer of the company who is in default or
• any other person, as the case may be
to show cause, within such period as may be specified in the notice (not being less
than fifteen days and more than thirty days from the date of service thereon), why
the penalty should not be imposed on it or him.
(iii) Manner of the written notice: Every notice issued above shall clearly indicate the
nature of non-compliance or default under the Act alleged to have been committed or
made by
• such company,
• officer in default, or
• any other person, as the case may be

3Substituted by Companies (Adjudication of Penalties) Amendment Rules, 2019, w.e.f 19-2-2019.

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 11.10 CORPORATE AND ECONOMIC LAWS

and also draw attention to the relevant penal provisions of the Act and the maximum
penalty which can be imposed on the company, and each of the officers in default, or
the other person.
(iv) Period of filing reply to the notice: The reply to such notice shall be filed in
electronic mode only within the period as specified in the notice:
Provided that the adjudicating officer may, for reasons to be recorded in writing,
extend the period referred to above by a further period not exceeding fifteen days, if
the company or officer in default or any person as the case may be, satisfies the
adjudicating officer that it or he has sufficient cause for not responding to the notice
within the stipulated period or the adjudicating officer has reason to believe that the
company or the officer or the person has received a shorter notice and did not have
reasonable time to give reply.
(v) Physical appearance: If, after considering the reply submitted by such company, its
officer, or any other person, as the case may be, the adjudicating officer is of the
opinion that physical appearance is required, he shall issue a notice, within a period
of ten working days from the date of receipt of reply fixing a date for the appearance
of such company, through its authorised representative, or officer of such company,
or any other person, whether personally or through his authorised representative.
Provided that if any person, to whom a notice is issued under point (ii), desires to
make an oral representation, whether personally or through his authorised
representative and has indicated the same while submitting his reply in electronic
mode, the adjudicating officer shall allow such person to make such representation
after fixing a date of appearance.
(vi) Passing of an order by the adjudicating officer: On the date fixed for hearing and
after giving a reasonable opportunity of being heard to the person concerned, the
adjudicating officer may, subject to reasons to be recorded in writing, pass any order
in writing as he thinks fit including an order for adjournment.
Provided that after hearing, adjudicating officer may require the concerned person to
submit his reply in writing on certain other issues related to the notice under point (ii)
relevant for determination of the default.
(vii) Period for passing the order: The adjudicating officer shall pass an order:
(a) within 30 days of the expiry of the period referred in point (ii) or of such
extended period as referred therein, where physical appearance was not
required under point (v);
(b) within 90 days of the date of issue of notice under point (ii), where any person
appeared before the adjudicating officer under point (v):
However, in case an order is passed after the aforementioned duration, the reasons
of the delay shall be recorded by the adjudicating officer and no such order shall be
invalid merely because of its passing after the expiry of such 30 days or 90 days as
the case may be.

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COMPOUNDING OF OFFENCES, ADJUDICATION AND SPECIAL COURTS 11.11

(viii) Date and sign on order: Every order of the adjudicating officer shall be duly dated
and signed by him and shall clearly state the reasons for requiring the physical
appearance under point (v).
(ix) Forwarding of copy of an order: The adjudicating officer shall send a copy of the
order passed by him
• to the concerned company,
• officer who is in default or
• any other person or
• all of them and
• to the Central Government and
• a copy of the order shall also be uploaded on the website.
(x) Powers of Adjudicating Authority: For the purposes of this rule , the adjudicating
officer shall have the following powers, namely:-
(a) to summon and enforce the attendance of any person acquainted with the
facts and circumstances of the case after recording reasons in writing;
(b) to order for evidence or to produce any document, which in the opinion of the
adjudicating officer, may be relevant to the subject matter.
(xi) Failure to be present before the adjudicating authority: If any person fails to
reply or neglects or refuses to appear as required under point (v) or point (x) before
the adjudicating officer, the adjudicating officer may pass an order imposing the
penalty, in the absence of such person after recording the reasons for doing so.
(xii) Consideration to following factors while levying penalty: While adjudging
quantum of penalty, the adjudicating officer shall have due regard to the following
factors, namely: -
(a) size of the company;
(b) nature of business carried on by the company:
(c) injury to public interest;
(d) nature of the default;
(e) repetition of the default;
(f) the amount of disproportionate gain or unfair advantage, wherever
quantifiable, made as a result of the default; and
(g) the amount of loss caused to an investor or group of investors or creditors as
a result of the default:
However, in no case, the penalty imposed shall be less than the minimum penalty
prescribed, if any, under the relevant section of the Act.

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 11.12 CORPORATE AND ECONOMIC LAWS

(xiii) Fixed sum of penalty: In case a fixed sum of penalty is provided for default of a
provision, the adjudicating officer shall impose that fixed sum, in case of any default
therein.
(xiv) Payment of penalty: Penalty shall be paid through Ministry of Corporate Affairs
portal only.
(xv) Sum to be credited to the Consolidated Fund of India: All sums realised by way
of penalties under the Act shall be credited to the Consolidated Fund of India.
*Explanation: For the purposes of this rule, the term “specified manner” shall mean
service of documents as specified under section 20 of the Act and the rules made
thereunder and details in respect of address (including electronic mail ID) provided in
the KYC documents filed in the registry shall be used for communication under this
Rule.
(2) The Central Government shall while appointing adjudicating officers, specify their
jurisdiction in the order under sub-section (1).
4(3) The adjudicating officer may, by an order—
(a) impose the penalty on the company, the officer who is in default, or any other
person, as the case may be, stating therein any non-compliance or default under the
relevant provisions of this Act; and
(b) direct such company, or officer who is in default, or any other person, as the case
may be, to rectify the default, wherever he considers fit.
5Provided that in case the default relates to non-compliance of sub-section (4)
of section 92 or sub-section (1) or sub-section (2) of section 137 and such default has
been rectified either prior to, or within thirty days of, the issue of the notice by the
adjudicating officer, no penalty shall be imposed in this regard and all proceedings
under this section in respect of such default shall be deemed to be concluded.
(4) The adjudicating officer shall, before imposing any penalty, give a reasonable opportunity of
being heard to 6such company, the officer who is in default or any other person.
(5) Any person aggrieved by an order made by the adjudicating officer may prefer an appeal to
the Regional Director having jurisdiction in the matter.
(6) Every appeal shall be filed within sixty days from the date on which the copy of the order
made by the adjudicating officer is received by the aggrieved person and shall be in such
form, manner and be accompanied by such fees in Rule 4 of the Companies (Adjudication
of Penalties) Rules, 2014.

4Substituted by the Companies (Amendment) Act, 2019, w.r.e.f. 2-11-2018

5Inserted by the Companies Amendment Act 2020 w.e.f. 22nd January 2021
6Substituted by the Companies (Amendment) Ordinance, 2019, w.r.e.f. 2-11-2018

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COMPOUNDING OF OFFENCES, ADJUDICATION AND SPECIAL COURTS 11.13

(7) The Regional Director may, after giving the parties to the appeal an opportunity of being
heard, pass such order as he thinks fit, confirming, modifying or setting aside the order
appealed against.
(8) (i) Where company 7fails to comply with the order made under sub-section (3) or sub-
section (7), as the case may be within a period of ninety days from the date of the
receipt of the copy of the order, the company shall be punishable with fine which
shall not be less than twenty five thousand rupees but which may extend to five lakh
rupees.
(ii) 8Where an officer of a company or any other person who is in default fails to
comply with the order made under sub-section (3) or sub-section (7), as the case
may be, within a period of ninety days from the date of the receipt of the copy of the
order, such officer shall be punishable with imprisonment which may extend to six
months or with fine which shall not be less than twenty-five thousand rupees but
which may extend to one lakh rupees, or with both.

16. PENALTY FOR REPEATED DEFAULT [SECTION 454A] 9

Where a company or an officer of a company or any other person having already been subjected
to penalty for default under any provisions of this Act, again commits such default within a period
of three years from the date of order imposing such penalty passed by the adjudicating officer or
the Regional Director, as the case may be, it or he shall be liable for the second or subsequent
defaults for an amount equal to twice the amount of penalty provided for such default under the
relevant provisions of this Act.

by the Companies (Amendment) Act, 2019, w.r.e.f. 2-11-2018.

7Substituted

by the Companies (Amendment) Act, 2019, w.r.e.f. 2-11-2018.

8Substituted

9Inserted by the Companies (Amendment) Act, 2019, w.e.f. 2-11-2018.

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 11.14 CORPORATE AND ECONOMIC LAWS

TEST YOUR KNOWLEDGE

Questions
1. In the annual general meeting of XYZ Ltd., while discussing on the matter of retirement and
reappointment of director Mr. X, allegations of fraud and financial irregularities were levelled
against him by some members. This resulted into chaos in the meeting. The situation was
normal only after the Chairman declared about initiating an inquiry against the director. Mr. X,
however, could not be re-appointed in the meeting. The matter was published in the
newspapers next day. On the basis of such news, whether the court can take cognizance of
the matter and take action against the director on its own?
Justify your answer with reference to the provisions of the Companies Act, 2013.
2. What is the object of Constituting Panel for Mediation and Conciliation under the Companies
Act, 2013? Who can file application for mediation and conciliation?
3. Mr. Joseph, a member of Armaments Ltd., is aggrieved due to failure of the company to make
payment of dividend declared in the AGM held in August, 2015. He makes a complaint, in
writing, before the court of competent jurisdiction within the prescribed period of limitation, but
the court refused to take cognizance of the alleged offence. Explain the legal position in this
regard under the Companies Act, 2013.
Also state the offences under the Companies Act, 2013 which are cognizable and which are
non-cognizable.
4. Excel Ltd. committed an offence under the Companies Act, 2013. The offences falls within
the jurisdiction of a special court of Bundi district in which the registered office of Excel Ltd
was situated. However, in that Bundi district, there were two special courts one in X place
and other in Y place. Identify the jurisdiction of special court for trial of an offences committed
by Excel Ltd.
5. Before imposing penalty, the adjudicating authority issued a show cause notice to the
company and its officers on 15th July, 2020 to represent before the adjudicating authority.
The notice was served on them on 31st July 2020. State the time period within which the
company and its officers who were called upon may be present before the Adjudicating
authority.
Answers
1. Section 439 of the Companies Act, 2013 provides that offences under the Act shall be non-
cognizable. As per this section:
1. Notwithstanding anything contained in the Code of Criminal Procedure, 1973, every
offence under this Act except the offences referred to in sub section (6) of section
212 shall be deemed to be non-cognizable within the meaning of the said Code.

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COMPOUNDING OF OFFENCES, ADJUDICATION AND SPECIAL COURTS 11.15

2. No court shall take cognizance of any offence under this Act which is alleged to have
been committed by any company or any officer thereof, except on the complaint in
writing of the Registrar, a shareholder or a member of the company, or of a person
authorized by the Central Government in that behalf.
Thus, in the given situation, the court shall not initiate any suo moto action against the director
Mr. X without receiving any complaint in writing of the Registrar of Companies, a shareholder
of the company or of a person authorized by the Central Government in this behalf.
2. Under section 442 of the Companies Act, 2013, it is provided that the Central Government
shall maintain a panel of experts for mediation between the parties during pendency of any
proceedings before the Central Government or the Tribunal or the Appellate Tribunal under
the Act. In common parlance, mediation means intervention of some third party in a dispute
with the intention to resolve the dispute. Similarly, conciliation means the powers of
adjusting or settling disputes in a friendly manner through extra judicial means. The object
behind the panel is to dispose the matter pending before the Government / Tribunal as
mentioned above.
Filing of application: Application for mediation and conciliation can be made by:
(A) any parties to the proceedings (It shall be accompanied with such fees and in such
form as may be prescribed)
(B) The Central Government or the Tribunal or the Appellate Tribunal before which any
proceeding is pending may, suo moto refer any matter pertaining to such proceeding
to such number of experts as it may deem fit.
3. Cognizance of offence: A court shall take cognizance of any offence under this Act which
is alleged to have been committed by any company or any officer thereof only on the written
complaint of -
(a) The Registrar,
(b) A shareholder of the company
(c) A member of the company, or
(d) Of a person authorised by the Central Government in that behalf.
Provided that the court may take cognizance of offences relating to issue and transfer of
securities and non-payment of dividend, on a complaint in writing, by a person authorised
by the Securities and Exchange Board of India.
In the present case, Mr. Joseph, a member of Armaments Ltd. is aggrieved due to failure of the
company to make payment of dividend declared in the AGM held in August 2015. He makes a

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 11.16 CORPORATE AND ECONOMIC LAWS

complaint, in writing, before the court of competent jurisdiction within the prescribed period of
limitation, but the court refused to take cognizance of the alleged offence.
Here, the Court shall take cognizance of the offence relating to nonpayment of dividend as
the shareholder have made a complaint in writing before the competent jurisdiction.
Cognizable and non-cognizable offences: Overriding the provisions given under the
Code of Criminal Procedure, 1973, every offence under the Companies Act, 2013 except
the offences referred to in section 212(6) of the Companies Act, 2013, which deals with the
investigation into affairs of company by serious fraud investigation office, shall be deemed
to be non-cognizable within the meaning of the said Code.
Therefore, the offences as covered under section 212(6) shall now be deemed to be
cognizable where police officer may arrest person without warrant and are non-bailable.
The Companies Act, 2013 establishes the offence covered under section 212(6) as a public
wrong which has to be prevented and controlled. This non-bailable nature of the offences
deter the offender and the others from committing further and similar offences.
4. All offences which are punishable in this Act with imprisonment of 2 years or more, shall be
triable only by the special court established for the area in which the registered office of the
company in relation to which the offence is committed. According to section 436 where
there are more special courts than one for such area, by such one of them as may be
specified in this behalf by the High court concerned.
Accordingly, in the given case, there are more than one special court in Bundi district where
registered office of Excel Ltd. is situated. The jurisdiction for trial in special court will be
specified by H.C of the State (i.e. Rajasthan).
5. Issue of written notice by an adjudicating officer: Rule 3 of the Companies (Adjudication
of Penalties) Rules, 2014 read with section 454 of the Companies Act, 2013, states that
before adjudging penalty, the adjudicating officer shall issue a written notice in the specified
manner-
• to the company and
• to officer of the company who is in default or
• any other person, as the case may be
to show cause, within such period as may be specified in the notice (not being less than
fifteen days and more than thirty days from the date of service thereon), why the penalty
should not be imposed on it or him.
Accordingly, the company and its officers shall be presented before the Adjudicating
Authority on or before 30 th August 2020 (being not more than 30 days from the date of
service of notice thereon).

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