Compounding of Offences, Adjudication and Special Courts – CA Final Law Study Material is designed strictly as per the latest syllabus and exam pattern.
Compounding of Offences, Adjudication and Special Courts – CA Final Law Study Material
Question 1.
Mr. A is Judicial magistrate in a lower court. He was appointed to hold the office of the special court for the speedy disposal of the pending cases under the Act. Decide as per the applicable provisions of the Companies Act, 2013, whether the appointment of Mr. A is tenable. [MTP-March 18]
Answer:
Eligibility for appointment as judge of Special Court:
As per Sec. 435 of Companies Act, 2013, a Special Court shall consist of:
(a) a single judge holding office as Session Judge or Additional Session Judge, in case of offences punishable under this Act with imprisonment of two years or more; and
(b) a Metropolitan Magistrate or a Judicial Magistrate of the First Class, in the case of other offences,
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.
In the instant case, Mr. A, a judicial magistrate of a lower court was appointed to hold the office of the special court for the speedy disposal of the pending cases under the Act.
Conclusion: Considering the provisions as stated in Sec. 435, Mr. A is not qualified as he is a judicial magistrate of lower court.
Question 2.
Excel Ltd. committed an offence under the Companies Act, 2013. The offences fall within the jurisdiction of a special court of Bundi district of Rajasthan in which the registered office of Excel Ltd. was situated. However, in that district, there were two special courts one in X place and other in Y place. Identify the jurisdiction of the special court for trial of an offence committed by Excel Ltd. [MTP-March 2018, Oct. 19, May 20)
Answer:
Competent Court for trial of an offence:
As per Sec. 436(1) of Companies Act, 2013, 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.
- In case there are more than one special courts for such area, offences shall be triable by such one of them as may be specified in this behalf by the high court concerned.
- In the instant case, there are more than one special court in such area where registered office of Excel Ltd. is situated.
Conclusion: The jurisdiction for trail in special court will be specified by High Court of the State (i.e. Rajasthan).
Question 3.
Describe the Power of special court on trial of an offence where it appears to the Special Court that the nature of the case is such that the sentence of imprisonment for a term exceeding one year may have to be passed. [MTP-Aug. 18]
Answer:
Summary Trial:
As per Sec. 436(3) of Companies Act, 2013, notwithstanding anything contained in the Code of Criminal Procedure, 1973, the Special Court may, if it thinks fit, try in a summary way any offence under this Act which is punishable with imprisonment for a term not exceeding 3 years.
However, 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 course of, a summary trial, it appears to the Special
Court
that the nature of the case is such that the sentence of imprisonment for a term exceeding one year may have to be passed,
or
that it is, for any other reason, undesirable to try the case summarily the Special Court shall, after hearing the parties, record an order to that effect and thereafter recall any witnesses who may have been examined and proceed to hear or rehear the case in accordance with the procedure for the regular trial.
Question 4.
Which offences are deemed to be Non- cognizable under the Companies Act, 2013? Enumerate the relevant provisions.
Answer:
Non-Cognizable offences:
As per Sec. 439(1), every offence under the Companies Act, 2013 except the offences referred to in Sec. 212(6) shall be deemed to be non-cognizable within the meaning of the Code of Criminal Procedure.
As per Sec. 439(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 written complaint of
- the Registrar,
- a shareholder of the company, or
- a person authorised by the Central Government in that behalf.
However, 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 SEBI.
In case of 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 C.G. in that behalf.
Question 5.
In the AGM 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. [Nov. 15 (4 Marks), MTP – March 19, Oct 20]
Or
In the annual general meeting of XYZ Ltd. held on 28th May, 2020, while discussing on the matter of retirement and reappointment of director Mr. X, allegations of fraud of ₹ 20 lakhs in Bombay branch of the Company were marked against him by some members. This resulted into disorder and confusion in the meeting. The Chairman declared 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, examine 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. [Nov. 20 – New Syllabus (4 Marks)]
Answer:
Suo motu cognizance by Court:
As per Sec. 439(1), every offence under the Companies Act, 2013 except the offences referred to in Sec. 212 (6) shall be deemed to be non-cognizable within the meaning of the Code of Criminal Procedure.
As per Sec. 439(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 written complaint of
- the Registrar,
- a shareholder of the company, or
- a person authorised by the Central Government in that behalf.
However, 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 SEBI.
Conclusion: Considering the provisions of Sec. 439, the court cannot initiate any suo motu action against the director 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.
Question 6.
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, 2020. 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. [MTP-April 18]
Answer:
Cognizance of offences:
As per Sec. 439(1), every offence under the Companies Act, 2013 except the offences referred to in Sec. 212 (6) shall be deemed to be non-cognizable within the meaning of the Code of Criminal Procedure.
As per Sec. 439(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 written complaint of
- the Registrar,
- a shareholder of the company, or
- a person authorised by the Central Government in that behalf.
However, 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 SEBI.
In the instant case, Mr. Joseph, a member of the company is aggrieved due to failure of the company to make payment of dividend declared in the AGM held in August 2018. 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.
Conclusion: The Court shall take cognizance of the offence relating to non-payment of dividend as the shareholders have made a complaint in writing before the competent jurisdiction.
Cognizable and non-cognizable offences:
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 Code of Criminal procedure.
The offences as covered u/s 212(6) shall now be deemed to be cognizable where police officer may arrest person without warrant and are non-bailable.
Question 7.
P, a private company committed an offence related to issue of securities to a group of persons. A shareholder among the group, filed a complaint against the company and its officers. Examine the law related to the cognizance of an offence under the Companies Act, 2013. What if, the said company would have been a government company?
Answer:
Cognizance of offences:
As per Sec. 439(1), every offence under the Companies Act, 2013 except the offences referred to in Sec. 212(6) shall be deemed to be non-cognizable within the meaning of the Code of Criminal Procedure.
As per Sec. 439(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 written complaint of
- the Registrar,
- a shareholder of the company, or
- a person authorised by the Central Government in that behalf.
However, 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 SEBI.
In the instant case, a private company committed an offence related to issue of securities to a group of persons. A shareholder among the group, filed a complaint against the company and its officers.
Conclusion: The Court shall take cognizance of the offence relating to issue of securities. In case of Government company, court will not take cognizance unless complaint is being filed by a person authorized by C.G.
Question 8.
All offences under the Companies Act, 2013 are non-cognizable except offences of fraud covered under section 447 of the Act. Explain the validity of the statement. [May 18 – New Syllabus (2 Marks)]
Answer:
Statement is valid. Sec. 439(1) of Companies Act, 2013 provides that every offence under the Companies Act, 2013 except the offences referred to in Sec. 212(6) shall be deemed to be non- cognizable within the meaning of the Code of Criminal Procedure.
As per Sec. 212(6), offences covered u/s 447 shall be cognizable.
Question 9.
What do you understand by the terms “Mediation” and “Conciliation”? Mention the provisions regarding Mediation and Conciliation Panel under the Companies Act, 2013. [Nov. 17 (3 Marks)]
Answer:
Meaning of Mediation and Conciliation:
In common parlance, mediation means intervention of some third party in a dispute with the intention to resolve the dispute. Conciliation means the process of adjusting or settling disputes in a friendly manner through extra judicial means.
Constitution and Functioning of Mediation and Conciliation Panel:
Sec. 442 of the Companies Act, 2013 deals with the constitution and functioning of the mediation and conciliation panel in order to dispose the matter. Accordingly,
(1) Maintenance of the Panel: The C.G. shall maintain a panel of experts to be known as Mediation and Conciliation Panel for mediation between the parties during the pendency of any proceedings before the C.G. or the Tribunal or the Appellate Tribunal under this Act.
(2) Panel consisting of Experts: The Panel shall consist of such number of experts having such qualification as may be prescribed.
(3) Filing of Application: Application for mediation and conciliation can be made by:
- any parties to the proceedings.
- The Central Government or the Tribunal or the Appellate Tribunal before which any proceeding is pending may, suo motu refer any matter pertaining to such proceeding to such number of experts as it may deem fit.
(4) Appointment of expert/s from Panel: The C.G. or the Tribunal or the Appellate Tribunal before which any proceeding is pending may appoint one or more experts from the Panel as may be deemed fit.
(5) Fees, terms and conditions of the experts: The fee and other terms and conditions of experts of the Mediation and Conciliation Panel shall be such as may be prescribed.
(6) Procedure for the disposal of matter: In order to dispose the matter, the Mediatiorrand Conciliation Panel shall follow such procedure as may be prescribed.
(7) Period for the disposal of matter: The Mediation and Conciliation Panel shall dispose of the matter referred to it within a period of three months from the date of such reference and forward its recommendations to the Central Government or the Tribunal or the Appellate Tribunal, as the case may be.
(8) Filing of objection on the recommendation of the 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.
Question 10.
What is the object of Conciliation Panel for Mediation and Conciliation under the Companies Act, 2013? Who can file application for mediation and conciliation? [RTP-Nov. 18]
Answer:
Meaning of Mediation and Conciliation:
In common parlance, mediation means intervention of some third party in a dispute with the intention to resolve the dispute. Conciliation means the process of adjusting or settling disputes in a friendly manner through extra judicial means.
Constitution and Functioning of Mediation and Conciliation Panel:
Sec. 442 of the Companies Act, 2013 deals with the constitution and functioning of the mediation and conciliation panel in order to dispose the matter. Accordingly,
(1) Maintenance of the Panel: The C.G. shall maintain a panel of experts to be known as Mediation and Conciliation Panel for mediation between the parties during the pendency of any proceedings before the C.G. or the Tribunal or the Appellate Tribunal under this Act.
(2) Panel consisting of Experts: The Panel shall consist of such number of experts having such qualification as may be prescribed.
(3) Filing of Application: Application for mediation and conciliation can be made by:
- any parties to the proceedings.
- The Central Government or the Tribunal or the Appellate Tribunal before which any proceeding is pending may, suo motu refer any matter pertaining to such proceeding to such number of experts as it may deem fit.
(4) Appointment of expert/s from Panel: The C.G. or the Tribunal or the Appellate Tribunal before which any proceeding is pending may appoint one or more experts from the Panel as may be deemed fit.
(5) Fees, terms and conditions of the experts: The fee and other terms and conditions of experts of the Mediation and Conciliation Panel shall be such as may be prescribed.
(6) Procedure for the disposal of matter: In order to dispose the matter, the Mediatiorrand Conciliation Panel shall follow such procedure as may be prescribed.
(7) Period for the disposal of matter: The Mediation and Conciliation Panel shall dispose of the matter referred to it within a period of three months from the date of such reference and forward its recommendations to the Central Government or the Tribunal or the Appellate Tribunal, as the case may be.
(8) Filing of objection on the recommendation of the 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.
Question 11.
What are the powers of the Central Government under the Companies Act, 2013 regarding:
(i) To appoint company prosecutors [MTP-April 18, RTP-May 18]
(ii) To Appeal against acquittal. [MTP-April 18, RTP-May 18, MTP-Oct.18, Nov. 18-New Syllabus (2 Marks)]
Answer:
Power of Central Government
(i) To appoint company prosecutors:
Sec. 443 of Companies Act, 2013 lays down the provisions relating to powers of C.G. to appoint company prosecutors. Accordingly:
The Central Government may appoint (generally, or for any case, or in any case, or for any specified class of cases in any local area) one or more persons, as company prosecutors for the conduct of prosecutions arising out of this Act; and
The persons so appointed as company prosecutors shall have all the powers and privileges conferred on Public Prosecutors appointed under section 24 of the Cr. PC.
(ii) Appeal against acquittal:
As per Sec. 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.
Appeal presented by such prosecutor or other person shall be deemed to have been validly presented to the Appellate Court.
Question 12.
The Central Government wants to appoint Mr. Honest as company Prosecutor. Can it do so? Mention the provisions regarding the power of Central Government to appoint company prosecutors along with their powers and privileges under the Companies Act, 2013. [Nov. 18-Old Syllabus (4 Marks)]
Answer:
Power of C.G. to appoint Company Prosecutors:
Sec. 443 of the Companies Act, 2013 deals with the powers of Central Government to appoint company prosecutors. Accordingly,
Not withstanding anything contained in the Code of Criminal Procedure, 1973, the C.G. may appoint generally, or for any case, or in any case, or for any specified class of cases in any local area, one or more persons, as company prosecutors for the conduct of prosecutions arising out of this Act.
The persons so appointed as company prosecutors shall have all the powers and privileges conferred by the Code on Public Prosecutors appointed u/s 24 of the Code.
Conclusion: C.G. may appoint Mr. Honesfas Company Prosecutor.