Thinking Star Limited, a Public Limited Company was into manufacturing of steel and steel products. The Company wanted to expand its operations and to fund the same, it evaluated various options including bank loan, priv

As provided under section 441 of the Companies Act, 2013 any offence punishable (whether committed by a company or any officer thereof) not being an offence punishable with imprisonment only, or punishable with imprisonment and also with fine, may, either before or after the institution of any prosecution, be compounded by the Tribunal; or where the maximum amount of fine which may be imposed for such offence does not exceed twenty five lakh rupees, by the Regional Director or any officer authorised by the Central Government. However, As per Section 454 of the Companies Act, 2013 provides that the adjudicating officer appointed by the central government may, by an order impose the penalty on the company, the officer who is in default, or any other person, as the case may be, stating therein any non-compliance or default under the relevant provisions of this Act; and direct such company, or officer who is in default, or any other person, as the case may be, to rectify the default, wherever he considers fit. In the given case, the company has made private placement without complying the provisions under section 42 of the Companies Act, 2013. Hence, the promoters and directors of the company be liable for a penalty which may extend to the amount raised through the private placement or two crore rupees, whichever is lower, and the company shall also refund all monies with interest to subscribers within a period of thirty days of the order imposing the penalty. Accordingly, the suggestion of Mr. S, Corporate adviser is not correct, as the offence under section 42 of Companies Act, 2013 is subject to the adjudication by the adjudication officer appointed by the Central Government and compounding provisions are not applicable on defaults in private placement.