Niruthan and Vanithan, were two close friends and IITians. They had founded a company together called Valuin Technologies Private Ltd, which was a start-up. The Company started to grow in terms of its service offerings a

Compounding of an offence is an opportunity given in the Corporate laws, to the Companies or any of its Officers, to make good the non-compliance committed by them. The legislative construct is expected to provide for the guiding legal provisions and also allow a scope to rectify mistakes if any, committed inadvertently. Accordingly, it was considered necessary (also by the Rajinder Sachar Committee) that there is greater need of flexibility in the administration of the Corporate Laws, particularly its penal provisions not only because large number of defaults are of technical nature but also because they arise out of ignorance of the lengthy and bewildering complexity of the legal provisions. Therefore, the concept of compounding of offences was incorporated in the law as a measure to avoid the long-drawn process of prosecution, which would save both cost and time in exchange of payment of a penalty. Compounding is not defined in Companies Act or FEMA or SEBI laws. On perusal of various legal provisions relating compounding, it can be noted that compounding is an admission of guilt either voluntarily or on receipt of notice of default or initiation of prosecution. The defaulters agree to pay penalty which may be ordered by the Compounding authority to be paid. As per the Black's Law Dictionary, to "Compound" means "to settle a matter by a money payment, in lieu of other liability." As per this definition Compounding is akin to a Settlement Mechanism, a settlement by paying the penalty in lieu of facing the prosecution for the offence committed. Compounding is essentially a compromise or arrangement between administrator of the enactment and person committing an offence. Benefits of Compounding Buy peace of mind. Generally, compounding amount is not be treated as fine. Speedy disposal of offences and justice Judiciary can devote more time and concentrate on serious cases No need to appear before prosecution authorities. It provides comfort to individuals and corporates and persons connected with it. Amount paid as compounding fee under law for can be claimed as a tax deduction under the Income Tax Act while a penalty paid for contravention is not eligible for deduction Procedure for Compounding (a) Board Meeting: Call for a board meeting to decide on compounding as per the CA, 2013. (b) Quantification of Fine: Arrive at the amount of the fine involved as per the relevant section(s) (c) Resolutions: Hold the Board Meeting and pass resolution(s) to compound and provide for preparation and providing necessary authorization for compounding. (d) Application: Every application for the compounding of an offence shall be made to the Registrar who shall forward the same, together with his comments thereon, to the Tribunal or the Regional Director or any officer authorized by the Central Government, as the case maybe. The filing with Registrar of Companies (ROC) is done in the e-from GNL-1 prescribed for this purpose. Also deliver sufficient number of hard copies of the compounding application to ROC for him to forward it to Regional Director (RD)/Tribunal (NCLT) based on the quantum of fee involved. (e) Personal Hearing: There will be a personal hearing before the Regional Director or Tribunal which will decide the amount to be paid for compounding. (f) Order: Get the order passed by the RD/NCLT and pay the amount stipulated within the time fixed. (g) Filing: File Order of RD/NCLT with ROC in form INC-28 and ROC will take note of the same.