Benjaram Sreenivasa Reddy vs Registrar of Companies

C.V. Nagarjuna Reddy, J.—Feeling aggrieved by the failure of the Company Law Board, Chennai Bench, to issue a prior notice and hear them on the quantum of compounding fees required to be paid by them under section 621A of the Companies Act, 1956 (for short "the Act"), the appellants filed the present appeal. Upon noticing that the Company Law Board, Chennai Bench, has not been following regulation 29 of the Company Law Board Regulations, 1991 (for short "the Regulations"), this court has impleaded the Company Law Board, Chennai Bench, and directed the presence of the Bench Officer by order dated June 18, 2014. In compliance with the direction of this court, the Bench Officer was personally present on June 30, 2014 and he has conceded that no order fixing the fine under section 162(1) of the Act was passed.

At the hearing, this court has expressed its view that the function of the Company Law Board, while acting under section 162(1) of the Act, is quasi-judicial in nature and that the same can be said to have been properly discharged only if it passes an order in writing as mandated by regulation 29 of the Regulations.

Mr. P. Vishnu Vardhan Reddy, the then Assistant Solicitor General, while candidly conceding that the Company Law Board has not been following this procedure in applications filed for compounding the offences and that instead the quantum of compounding fee was being intimated to the applicants in an informal manner without there being an order in writing, has requested for an adjournment for filing an affidavit undertaking to follow the abovementioned procedure.

Accordingly, Mr. C.S. Govindarajan, the Bench Officer of the Company Law Board, Chennai Bench, has filed an affidavit sworn to on July 25, 2014, wherein he has stated that on June 30, 2014, the office of the Company Law Board has issued hearing notices to the applicants, that the case which was posted for hearing on July 25, 2014, was adjourned at the instance of counsel for the applicants who filed his vakalath and also the affidavit and that, therefore, further hearing of the case is slated for August 13, 2014. He has also stated that the Company Law Board is strictly following the procedure contemplated under the Regulations and that it undertakes to follow this procedure in all the cases by issuing notices of hearing and conducting hearing before fixing the compounding fees and passing orders thereon. Having regard to the affidavit of the Bench Officer as referred to above, the company appeal is closed. As the application for compounding the offence is pending adjudication by the Company Law Board, the interim order of stay granted by this court on June 18, 2014, shall continue till the disposal of the said application.