<\/span><\/h2>\n\n\n\nThere is no legal definition of “compounding\nof offences”<\/strong> in India. Instead, the terms “compound”<\/strong>\nand “offence”<\/strong> have been defined individually and are covered\nbelow:<\/p>\n\n\n\n- According to Black’s Law Dictionary, the term “Compound<\/strong>” means:
- To resolve (a dispute) with financial compensation in lieu of further obligation; <\/li>
- To consent in order to avoid prosecuting (a crime)<\/li><\/ul><\/li>
- “Offence<\/strong>” is defined as a violation of Section 3 (38) of the General Clauses Act of 1897.
- Any action or inaction that is criminal under a current law.<\/li><\/ul><\/li>
- “Offence<\/strong>,” as defined by Section 2(n) of the Criminal Procedure Code, refers to:
- Any act or omission that is now illegal, including any conduct for which a complaint may be filed under section 20 of the Cattle-trespass Act of 1871.<\/li><\/ul><\/li><\/ol>\n\n\n\n
The compounding of offences is covered in Section\n441<\/em><\/strong> of the Companies Act of 2013 (the Act), which took effect on June\n1, 2016. Section 441<\/em><\/strong> states that any offence under the Act that\nis only punishable by a fine, whether it was committed by a company or one of\nits officers, may be resolved either before or after filing a complaint by the\ntribunal, the regional director, or another officer authorised by the Central\nGovernment, in cases where the maximum fine that can be imposed for the offence\nis not more than INR 5 lakhs. Additionally, any offence that is punishable by\nthe Act with incarceration, a fine, or both may be amended with the Special\nCourt’s approval, which was established in accordance with Section 435 of the\nAct.<\/p>\n\n\n\nEven the clauses of the Companies Act &\nRules that mandate obligatory imprisonment are only implemented in a select few\ninstances. Officers are typically charged with crimes under other statutes\nwhere the fines and\/or jail sentences are substantially harsher. The criminal culpability\nunder other laws and those of the Companies Act & Rules, however, are very\ndifferent. However, the Companies Act & Rules have a broadly defined\ndefinition of an officer who is in default, thereby extending the definition to\ncover officers as well as people present at the time of the non-compliance or\ncontravention. For example, criminal liability under the Criminal Procedure\nCode specifically states who will be an accused under a particular provision\nand there is limited scope for vicarious liability. This suggests that all\nofficials present at the time of the act may be held accountable and may be\nsubject to punishment [Davinder Kaur V. The State of West Bengal & Anr (CRR\n1341 of 2015)].<\/p>\n\n\n\n
It is uncommon to have general\nresponsibility for all officials, even when vicarious liability implications\nare present in several other statutes like the Negotiable Instruments Act,\n1881. For instance, the Calcutta High Court reiterated the stance taken in\nseveral other cases in the 2015 case of Davinder Kaur v. The State of West\nBengal and Ors.,<\/em> holding that any person in charge of the company’s affairs\nduring the period of non-compliance or contravention shall also be prosecuted\nby the trial courts as one of the offenders.<\/p>\n\n\n\nThe requirement for a wide definition of an\nofficer in default stems principally from the fact that it is often necessary\nto identify those who are accountable since offences are frequently committed\nby a group of people operating on behalf of the firm. However, the Supreme\nCourt of India clarified whether such broad liability on a group of people can\nbe upheld in 2019 in the case of Shiv Kumar Jatia vs. State of NCT of Delhi<\/em>\n[Criminal Appeal No. 1263 of 2019]. The Court ruled that in the absence of any\nparticular laws addressing vicarious responsibility, a person who acts on\nbehalf of a corporation can only be charged with a crime if there is adequate\nproof demonstrating both their active engagement and criminal intent. As a\nresult, in order to hold an officer of a company accountable, it is essential\nthat the officer be in charge of the company’s operations and that strong\nevidence be presented to prove both the actus reus (the action that constitutes\nthe essential element of the crime) and the mens reus (the criminal intent that\nmotivated the action).<\/p>\n\n\n\nWhile most crimes have an identifiable\nactus reus, determining the mens reus can be challenging. In order to establish\nthe mens reus of the authorities in charge of the company’s activities, the\nSupreme Court of India recommended an acid test of the “doctrine of\nattribution” in 2011. According to the Doctrine of Attribution, the\nresponsibility of the company’s “alter ego,” or the officials or\ngroup of persons participating in its business, is established by determining\ntheir criminal purpose and comprehending the rationale behind the action(s)\nthat were taken. An increase in such situations would be a potential remedy\ngiven the complexity.<\/p>\n\n\n\n
The Indian business sector has had several\nscams and frauds totaling thousands of crores, and as previously noted, given\nthe challenging COVID-19 context, there may be an increase in such instances.\nMaking sure that officers who are in charge of the company’s affairs and play a\nsignificant role in its management are required to purchase a specific amount\nof the company’s share capital would be one way to ensure that their interests\nare linked to and aligned with those of the company.<\/p>\n\n\n\n