NCLT Allows Compounding Under S.441 of Companies Act for 7-Year AGM Delay, Imposes ₹92.84 Lakh Fine - 2025-08-19

NCLT Slaps ₹92.84 Lakh Fine on Mumbai Firm for 7-Year AGM Default, Allows Compounding

Mumbai: The National Company Law Tribunal (NCLT), Mumbai Bench, has imposed a compounding fee of ₹92,84,000 on Tanvi Construction Private Limited and its Managing Director for failing to hold their Annual General Meeting (AGM) for seven consecutive financial years. The Bench, comprising Judicial Member Sh. Mohan Prasad Tiwari and Technical Member Sh. Charanjeet Singh Gulati, allowed the company's petition to compound the offence under Section 441 of the Companies Act, 2013.

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Case Background

The petition was filed by Tanvi Construction Private Limited and its Managing Director, Vijaykumar Govind Hegde, after they failed to conduct the mandatory AGMs from the financial year 2016-17 to 2022-23. This constituted a violation of Section 96 of the Companies Act, 2013, which is punishable under Section 99 of the Act.

The company, incorporated in 2003 and engaged in the real estate business, finally held all seven defaulted AGMs on a single day, September 3, 2024. The delays ranged from 339 days for the most recent AGM to a staggering 2,530 days for the AGM due in 2017. Following this, the company voluntarily filed a compounding application with the NCLT.

Arguments Presented

The petitioners argued that the failure to hold the AGMs was unintentional and not due to any mala fide motive. They attributed the lengthy delay to a "pending litigation before the court of law between the Directors of the Company." They submitted that once the dispute was resolved through consent terms, they took steps to rectify the non-compliance by holding the overdue meetings and filing the necessary documents.

The Registrar of Companies (RoC), Mumbai, in its report, confirmed the violation. The RoC noted that this was the company's first such offence and that the company had suo-motu (on its own) brought the default to their notice. However, the RoC also pointed out that complaints against the company and its directors were on record on the MCA portal.

Legal Principles and Tribunal's Observations

The Tribunal examined the relevant provisions of the Companies Act, 2013.

* Section 96: Mandates every company to hold an AGM annually, with a gap of not more than fifteen months between two meetings.

* Section 99: Prescribes the penalty for defaulting on Section 96. The penalty includes a fine up to ₹1 lakh, and in case of a continuing default, a further fine of up to ₹5,000 for every day the default continues.

* Section 441: Allows for the compounding of certain offences, providing a mechanism for settlement without protracted litigation.

The Bench acknowledged the petitioners' submissions regarding the internal disputes causing the delay. The judgment noted:

"It is the submission of the Petitioners that delays in holding the Annual General Meetings was due to pending litigation before the Court of Law between the Directors of the Company and that such delays were neither willful nor mala-fide."

While accepting the plea for compounding, the Tribunal calculated the penalty based on the extensive period of default.

Final Decision and Implications

After considering the facts, the NCLT allowed the compounding of the offence. The total compounding fee was set at ₹92,84,000, to be split equally between the company and the Managing Director (₹46,42,000 each). The petitioners are required to pay this amount to the "Pay and Accounts Officer, Ministry of Corporate Affairs, Mumbai" within 30 days.

The Tribunal stated that the fee was sufficient to act as a deterrent against future defaults. This order underscores the importance of statutory compliance for corporations, demonstrating that while the law provides a window for compounding offences, significant delays can result in substantial financial penalties.