NCLT Mumbai Compounds Decades of Delayed AGMs for Vaz Forwarding Limited, Citing Management Disputes and Financial Condition

Mumbai: The National Company Law Tribunal (NCLT), Mumbai Bench, has allowed the compounding of offences for Vaz Forwarding Limited and its directors concerning significant delays in holding Annual General Meetings (AGMs) for seven financial years spanning from 2010-11 to 2016-17. The Tribunal, comprising Ms. Lakshmi Gurung (Member J) and Sh. Hariharan Neelakanta Iyer (Member T), imposed a reduced compounding fee, taking into account the company's financial state and the circumstances leading to the defaults.

The application was filed under Section 441 of the Companies Act, 2013, read with Section 96 of the same Act, seeking to compound offences related to the contravention of Section 166 of the Companies Act, 1956 (applicable during the earlier period of default) and Section 96 of the Companies Act, 2013.

Case Background

Vaz Forwarding Limited, a public limited company incorporated in 1977, admitted to failing to hold its AGMs within the statutory timelines for the financial years 2010-11 through 2016-17. The company attributed the delays to a period of "complete deadlock" in the management since 2010-11, citing disputes with previous directors, the illness of one director, and hurdles created in finalizing accounts and convening meetings.

Specific instances highlighted included the removal of Director Mr. Mario Gerald Vaz in December 2015 and Mr. Clarence Robert Vaz in January 2016, followed by the appointment of the applicant directors. Further complications arose when former Director Mr. Winston Gregory Vaz was disqualified under Section 164(2) of the Companies Act, 2013, necessitating a search for a new director to meet the minimum requirement.

Despite the prolonged delays, the company stated that it eventually convened the pending AGMs for the years 2010-11 to 2016-17 in February and March 2018 and has held subsequent AGMs within the prescribed timeframes.

Registrar of Companies Report

The Registrar of Companies (RoC), Mumbai, filed a report acknowledging the applicants' admission of the violation. The RoC noted that the default under Section 96(1) had been rectified by holding the belated AGMs. The RoC also identified all directors who were in default during the respective periods, including former directors Mr. Mario Gerald Vaz and Mr. Clarence Robert Vaz , who were not parties to the compounding application. The RoC calculated the potential penalties based on the relevant sections and the duration of default, which ran into thousands of days for each financial year.

The RoC's calculation of maximum penalties for the company and directors amounted to crores of rupees across the different financial years and applicable legal provisions (Section 168 of the 1956 Act and Section 99 of the 2013 Act, read with Section 451 for repeat offences).

Tribunal's Decision

The NCLT considered the facts presented, the RoC report, and the applicants' submission that the default was inadvertent, without mala fide intent. The Tribunal emphasized that the offence had been made good by holding the delayed AGMs.

Crucially, the NCLT took a lenient view, considering the company's financial condition (noted as having Rs. 0.00 turnover as per the FY 2024 financial statement and being a "small company" based on paid-up capital) and the circumstances explained for the delays. The Tribunal decided to impose a significantly lower compounding fee compared to the maximum penalty calculated by the RoC.

The calculated compounding fees are detailed year-wise for the company and each applicant director, accounting for the specific period they were in default and the transition between the 1956 and 2013 Acts.

Vaz Forwarding Limited (Applicant No. 1): Total Compounding Fee of ₹15,53,600/-

Mr. Nigel Robert Vaz (Applicant No. 2): Total Compounding Fee of ₹1,61,400/- (responsible for FY 2015-16 and 2016-17)

Mrs. Marlene Winston Vaz (Applicant No. 3): Total Compounding Fee of ₹1,61,400/- (responsible for FY 2015-16 and 2016-17)

Mr. Winston Gregory Vaz (Applicant No. 4): Total Compounding Fee of ₹9,41,775/- (responsible for FY 2010-11 to 2016-17, periods he was director)

The Tribunal directed the applicants to pay the specified compounding fees within 30 days. Upon remittance, the offence will stand compounded. The NCLT noted that the compounded fee is intended to serve as a deterrent against future defaults.

The case, registered as CP - 4/2025, was disposed of based on these terms, with the Registry directed to notify the Registrar of Companies, Mumbai, upon compliance. The order highlights the NCLT's discretion under Section 441 to compound offences, balancing the severity of the non-compliance with mitigating factors like rectifying the default, the reasons for the delay, and the financial health of the company.