V.L.S FINANCE LTD.versusUNION OF INDIA & ORS.

                      [2013] 8 S.C.R. 849


                      V.L.S. FINANCE LTD.                            A
                                v.
                   UNION OF INDIA & ORS.
               (Civil Appeal No .. 2102 of 2004)
                         MAY 10, 2013·
                                                                     B
           [CHANDRAMAULI KR. PRASAD AND
                V. GOPALA GOWDA, JJ.]

     Companies Act, 1956 - ss. 621A(1) and (7) and 211(7)
- Complaint for offence punishable u/s. 211 (7) pending before       C
criminal court - Compounding of the offence by Company Law
Board - Permissibility - Held: In view of the nature of the
offence, it can be compounded by Company Law Board
before as well as after institution of prosecution - Company
Law Board was not obliged to take permission of the Court            D
before compounding the offence.

      Interpretation of Statutes - Rules of interpretation - When
the language of a provision is clear, it should be interpreted
in its ordinary sense - Addition or alteration of words or           E
expressions to be resorted to only in exceptional
circumstances to achieve the purpose of the statute.

     Practice and Procedure - New plea - Raising of- Before
Supreme Court - Permissibility - Held: If the facts of the case
give rise to pure question of law going to the root of the matter,   F
Supreme Court has discretion to go into the new plea.

    The questions for consideration in the present appeal
was whether the Company Law Board had power to
compound the offence punishable uls. 211 (7) of                      G
Companies Act, complaint whereof was pending for
consideration before the criminal court; whether the
Board was required to seek permission of the Court in
seisin of the matter, before compounding the offence; and
                               849                                   H
   850      SUPREME COURT REPORTS              [2013] 8 S.C.R.


A whether such plea having been raised for the first time
  before this Court, is maintainable   o




         Dismissing the appeal, the Court

       HELD: 1. In a case in which the facts pleaded give
B rise to a pure question of law going to the root of the
  matter, this Court possesses discretion to go into that.
  In the present case, it is an admitted position that the
  allegation made, exposed the Company and its Managing
  Director for punishment under Section 211 (7) of the
C Companies Act which provides for imprisonment or fine
  or with both. In the face of the same, no fact needs to be
  adjudicated and the point being a pure question of law
  going to the root of the matter, same can be permitted to
  be raised before this Court for the first time. (Paras 10
D and 11] [856-E, F-H]
       2.1. It is evident from the provisions of s. 621A(1) of
  Companies Act that any offence punishable under the
  Act, not being an offence punishable with imprisonment
E only or with imprisonment and also with fine, may be
  compounded either before or after the institution of the
  prosecution by the Company Law Board and in case, the
  minimum amount of fine which may be imposed for such
  offence does not exceed Rs. 5000/-, by the Regional
F Director on payment of certain fine. The penal provisions
  of the Act provide for different kinds of punishments for
  variety of offences and can be categorised as (i) offences
  punishable with fine only; (ii) offences punishable with
  imprisonment only; (iii) offences punishable with fine and
  imprisonment,(iv) offences punishable with fine or
G imprisonment and (v) offences punishable with fine or
  imprisonment or both. [Para 12] [589-8-E]
      2.2. Section 211 (7) of the Act provides for
  punishment with imprisonment for a term which may
H extend to six months or with fine or with both. Therefore,
  V.L.S. FINANCE LTD. v. UNION OF INDIA & ORS.          851

an accused charged with the offence under Section              A
211 (7) of the Act has not necessarily to be visited with
imprisonment or imprisonment and also fine but can be
let off by imposition of fine only. Section 621A(1) excludes
such offences which are punishable with imprisonment
only or with imprisonment and also with fine. The nature       B
of offence for which the accused has been charged,
necessarily does not invite imprisonment or
imprisonment and also fine. Hence, the nature of the
offence is such that it was possible to be compounded
by the Company Law Board. [Para 13] [859-F-H; 860-A]           C
     2.3. An offence committed by an accused under the
Act, not being an offence punishable with imprisonment
only or imprisonment and also with fine, is permissible
to be compounded by the Company Law Board either
before or after the institution of any prosecution. In view    D
of sub-section (7) of Section 621A, the criminal court also
possesses similar power to compound an offence after
institution of the prosecution. [Para 15] [861-B-C]
     3.1. Company Law Board can compound the offence
without permission of the Court. Ordinarily, the offence E
is compounded under the provisions of the Code of
Criminal Procedure and the power to accord permission
is conferred on the court excepting those offences for
which the permission is not required. Both sub-section
(1) and sub-section (7) of Section 621A of the Act start F
with a non-obstante clause. In view of the non-obstante
clause, the power of composition can be exercised by
the court or the Company Law Board. The legislature has
conferred the same power to the Company Law Board
which can exercise its power either before or after the G
institution of any prosecution whereas the criminal court
has no power to accord permission for composition of
an offence before the institution of the proceeding. The
legislature in its wisdom has not put the rider of prior
p~rmission of the ~c;>urt before compounding the offence  H
    852    SUPREME COURT REPORTS               [2013] 8 S.C.R.

A   by the Company Law Board and in case the contention
    of the appellant is accepted, same would amount to
    addition of the words "with the prior permission of the
    court" in the Act, which is not permissible. [Paras 16 and
    17) [861-D, E-H; 862-A-B]
B      3.2. While interpreting the provisions of a statute, the
  court avoids rejection or addition of words and resort to
  that only in exceptional circumstances to achieve the
  purpose of Act or give purposeful meaning. It is also a
  cardinal rule of interpretation that words, phrases and
C sentences are to be given their natural, plain and clear
  meaning. When the language is clear and unambiguous,
  it must be interpreted in an ordinary sense and no
  addition or alteration of the words or expressions used
  is permissible. Section 621A was brought in view of the
D need of leniency in the administration of the Act because
  a large number of defaults are of technical nature and
  many defaults occurred because of the complex nature
  of the provision. [Para 18) [862-C-E)

E      3.3. The power under sub-section (1) and sub-section
  (7) of Section 621A are parallel powers to be exercised
  by the Company Law Board or the authorities mentioned
  therein and prior permission of Court is not necessary for
  compounding the offence, when power of compounding
F is exercised by the Company Law Board. [Para 19) [862-
  E-G]
        CIVIL APPELLATE JURISDICTION : Civil Appeal No.
    2102 of 2004.
      From the Judgment & Order dated 5.11.2003 of the High
G Court of Delhi at New Delhi in Company Appeal (B) No. 1 of
  2001.
        R. Shankaranarayanan, Rakhi Ray, Ashok K. Sharma,
    Abhay Jena, Bina Gupta for the Appellant.
H
   V.L.S. FINANCE LTD. v. UNION OF INDIA & ORS.                853


    Jayant Bhushan, Binu Tamta, P. Parmeswaran, Atul                  A
Sharma, Annam, D.N. Rao, Nitesh Jain for the Respondent.
     The Judgment of the Court was delivered by
     CHANDRAMAULI KR. PRASAD, J. 1. This appeal by
special leave arises out of an order dated 5th of November, B
2003 passed by the Company Judge, Delhi High Court in
Company Appeal (B) No. 1 of 2001 whereby it has dismissed
the appeal assailing the order of the Company Law Board
allowing the compounding of offence under Section 211(7) of
the Companies Act.                                          C
     2. Short facts giving rise to the present appeal are that the
Registrar of Companies, NCT of Delhi and Haryana laid
complaint in the Court of Chief Metropolitan Magistrate, Tis
Hazari, inter alia alleging that during the course of inspection it
was noticed in the balance sheet of 1995-96 Schedule of the           D
fixed assets included land worth Rs. 21 crores. According to
the complaint, M/s. Sunair Hotels Ltd., for short 'the Company",
had taken this land from New Delhi Municipal Corporation on
licence and the Company only pays the yearly licence fee
thereof. Thus, according to the complainant, without any right        E
land has been shown as land in the Schedule of fixed assets,
which is not a true and fair view and punishable under Section
211 (7) of the Companies Act, hereinafter referred to as "the
Act". The Company and its Chairman-cum-Managing Director,
S.P. Gupta were arrayed as accused.                                   F
     3. However, before the court in seisin of the case could
proceed with the complaint, the Company and its Managing
Director jointly filed an application before the Company Law
Board for compounding the offence. The Northern Region
Bench of the Company Law Board, by its order dated 9th of             G
August, 2000 acceded to the prayer and compounded the
offence against the Managing Director on payment of Rs.
1000/- for each offence each year. While doing so, the
Company Law Board has held as follows:
                                                                      H
    854       SUPREME COURT REPORTS                    (2013] 8 S.C.R.


A         " ... The exercise of powers by the Company Law Board
          under 621A(1) is independent of exercise of powers by the
          court under sub-section (7) and all offences other than
          those which are punishable with imprisonment only or with
          imprisonment and also fine, can be compounded by
B         Company Law Board without any reference to sub-section
          (7), even in cases where prosecution is pending in a
          criminal court. Thus, it is clear that Company Law Board
          if so approached can compound offences and in such
          case no prior permission of the Court is necessary."
c     4. Aggrieved by the same, appellant preferred Company
  Appeal before the High Court, inter alia, contending that the
  power of compounding could be exercised by the criminal court
  and not by the Company Law Board. Said submission has not
  found favour and the Company Judge, in this connection,
D observed as follows:
          "18. In the light of the aforesaid discussions, it is held that
          the person seeking compounding of an offence in
          accordance with the procedure laid down in the Criminal
          Procedure Code can do so before the criminal Court with
E
          the permission of the Court under sub-section (7) of
          Section 621A of the Act, which normally cannot be done
          under the provisions of the Criminal Procedure Code.
          Such compounding of offence would always be relatable
          to the offence punishable with imprisonment or with fine
F
          or with both as is made clear under clauses (a) and (b) of
          sub-section (7). Under the aforesaid sub-section the
          offence punishable with imprisonment or with fine or both
          shall be compoundable with the permission of the Court
          and for such compounding the procedure laid down under
G         the Criminal Procedure Code is to be followed in that
          regard provided the prosecution is pending in that Court.
          I also hold the Company Law Board can compound an
          offence of the nature prescribed under sub-section (1)
          either before the institution of the criminal proceeding or
H         even after institution of the criminal proceeding and the
  V.L.S. FINANCE LTD. v. UNION OF INDIA & ORS.              855
         [CHANDRAMAULI KR. PRASAD, J.]

    said power is not subject to the provisions of sub-section     A
    (7). Both are parallel powers to be exercised by the
    prescribed authorities who have been empowered under
    the statute and one power is not dependent on the
    other...... "
                                                                   B
    5. Accordingly, the Company Judge dismissed the appeal.
    6. That is how the appellant is before us.
     7. We have heard Mr. R. Shankaranarayanan, for the
appellant, Ms. Binu Tamta, for the respondent-Union of India and   C
Mr. Jayant Bhushan, Senior Advocate for the Company and its
Managing Director.
     8. It is an admitted position that the allegations made
exposed the accused to an offence punishable under Section
211 (7) of the Act. The same reads as under:                       D
     "211. Form and contents of balance-sheet and profit
    and loss account.-
    xxx   xxx                    xxx
    (7) If any such person as is referred to in sub-section (6)    E
    of section 209 fails to take all reasonable steps to secure
    compliance by the company, as respects any accounts laid
    before the company in general meeting, with the provisions
    of this section and with the other requirements of this Act
    as to the matters to be stated in the accounts, he shall, in   F
    respect of each offence, be punishable with imprisonment
    for a term which may extend to six months, or with fine
    which may extend to ten thousand rupees, or with both:
          Provided that in any proceedings against a person
    in respect of an offence under this section, it shall be a     G
    defence to prove that a competent and reliable person was
    charged with the duty of seeing that the provisions of this
    section and the other requirements aforesaid were
    complied with and was in a position to discharge that duty:
                                                                   H
    856      SUPREME COURT REPORTS                 [2013] 8 S.C.R.


A              Provided further that no person shall be sentenced
          to imprisonment for any such offence unless it was
          committed wilfully.
               )()()(                )()()(


B        9. Thus, the offence alleged is punishable with
    imprisonment for a term which may extend to six months or with
    fine which may extend to Rs. 10,000/- or with both.
       10. Mr. Shankaranarayanan has taken an extreme stand
  before this Court and contends that the Company Law Board
C has no jurisdiction to compound an offence punishable under
  Section 211 (7) of the Act as the punishment provided is
  imprisonment also. Mr. Bhushan, however, submits that
  imprisonment is not mandatory punishment under Section
  211 (7) of the Act and, hence, the Company Law Board has the
D authority to compound the same. He also points out that this
  submission was not at all advanced before the Company Law
  Board and, therefore, the appellant cannot be permitted to raise
  this question for the first time before this Court. We are not in
  agreement with Mr. Bhushan in regard to his plea that this
E question cannot be gone into by this Court at the first instance.
  In our opinion, fn a case in which the facts pleaded give rise to
  a pure question of law going to the root of the matter, this Court
  possesses discretion to go into that. The position would have
  been different had the appellant for the first time prayed before
F this Court for adjudication on an issue of fact and then to apply
  the law and hold that Company Law Board had no jurisdiction
  to compound the offence.
       11. Here, it is an admitted position that the allegation made
  exposed the Company and its Managing Director for
G punishment under Section 211 (7) of the Act which provides for
  imprisonment or fine or with both. In the face of the same, no
  fact needs to be adjudicated and the point being a pure
  question of law going to the root of the matter, same can be
  permitted to be raised before this Court for the first time. But
H that does not help the appellant as we are inclined to accept
  V.L.S. FINANCE LTD. v. UNION OF INDIA & ORS.                857
         [CHANDRAMAULI KR. PRASAD, J.]
the submission of Mr. Bhushan on merit. Section 621A was              A
inserted by the Companies Amendment Act, 1988 on the
recommendation of the Sachar Committee. It was felt that
leniency is required in the administration of the provisions of
the Act particularly penalty provisions because a large number
of defaults are of technical nature and arise out of ignorance        B
on account of bewildering complexity of the provisions. Section
621A of the Act; as stood at the relevant time and relevant for
our purpose reads as follows:
    "621A. Composition of certain offences.- (1)
    Notwithstanding anything contained in the Code 6f                 C
    Criminal Procedure, 1973 (2 of 1974), any offence
    punishable under this Act whether committed by a company
    or any officer thereof, not being an offence punishable with
    imprisonment only, or with imprisonment and also with fine,
    may, either before or after the institution of any prosecution,   D
    be compounded by-
           (a) the Company Law Board; or
           (b) where the maximum amount of fine which may
           be imposed for such offence does not exceed five           E
           thousand rupees, by the Regional Director, on
           payment or credit, by the company or the officer, as
           the case may be, to the Central Government of such
           sum as that Board or the Regional Director, as the
           case may be, may specify:                                  F
          Provided that the sum so specified shall not, in any
    case, exceed the maximum amount of the fine which may
    be imposed for the offence so compounded:
          Provided further that in specifying the sum required        G
    to be paid or credited for the compounding of an offence
    under this sub-section, the sum, if any, paid by way of
    additional fee under Sub-section (2) of Section 611 shall
    be taken into account.
                                                                      H
    858       SUPREME COURT REPORTS                    [2013] 8 S.C.R.


A              )()(                       )()(            )()(


          (4)(a) 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 Company Law
          Board or the Regional Director, as the case may be.
B
                 (b) Where any offence is compounded under this
                 section, whether before or after the institution of any
                 prosecution, an intimation thereof shall be given by
                 the company to the Registrar within seven days from
c                the date on which the offence is so compounded.
                 (c) Where any offence is compounded before the
                 institution of any prosecution, no prosecution shall
                 be instituted in relation to such offence, either by the
                 Registrar or by any shareholder of the company or
D                by any person authorised by the Central
                 Government against the offender in relation to
                 whom the offence is so compounded.
                 (d) Where the composition of any offence is made
                 after the institution of any prosecution,
E                such composition shall be brought by the Registrar
                 in writing, to the notice of the Court in which the
                 prosecution is pending and on such notice of
                 the composition of the offence being given, the
                 company or its officer in relation to whom the
F                offence is so compounded shall be discharged.
                 )()(              )()(                              )()(


          (7) Notwithstanding anything contained in the Code of
          Criminal Procedure, 1973,-
G
                (a) any offence which is punishable under this Act
                with imprisonment or with fine, or with both, shall be
                compoundable with the permission of the Court, in
                accordance with the procedure laid down in that
                Act for compounding of offences;
H
   V.L.S. FINANCE LTD. v. UNION OF INDIA & ORS.              859
          . [CHANDRAMAULI KR. PRASAD, J.]
            (b) any offence which is punishable under this Act     A
            with imprisonment only or with imprisonment and
            also with fine shall not be compoundable.
     (8) No offence specified in this section shall be
     compounded except under and in accordance with the
                                                                   8
     provisions of this section."
      12. From a plain reading of Section 621A(1) it is evident
that any offence punishable under the Act, not being an offence
punishable with imprisonment only or with imprisonment and
also with fine, may be compounded either before or after the       c
institution of the prosecution by the Company Law Board and
in case, the minimum amount of fine which may be imposed
for such offence does not exceed Rs. 5000/-, by the Regional
Director on payment of certain fine. The penal provisions of the
Act provide for different kinds of punishments for variety of      D
offences and can be categorised as follows:
      (i) offences punishable with fine only,
      (ii) offences punishable with imprisonment only,
      (ii) offences punishable with fine and imprisonment,         E
      (iv) offences punishable with fine or imprisonment,
      (v) offences punishable with fine or imprisonment or both.
     13. Section 211 (7) of the Act provides for punishment with
imprisonment for a term which may extend to six months or with     F
fine or with both. Therefore, an accused charged with the
offence under Section 211 (7) of the Act has not necessarily to
be visited with imprisonment or imprisonment and also fine but
can be let off by imposition of fine only. Therefore, the
punishment provided under Section 211 (7) of the Act comes         G
under category (v) aforesaid. Section 621A(1) excludes such
offences which are punishable with imprisonment only or with
imprisonment and also with fine. As we have observed above,
the nature of offence for which the accused has been charged
necessarily does not invite imprisonment or imprisonment and       H
    860      SUPREME COURT REPORTS                   [2013) 8 S.C.R.


A   also fine. Hence, we are of the opinion that the nature of the
    offence is such that it was possible to be compounded by the
    Company Law Board.
        14. Mr. Shankaranarayanan, then submits that sub-section
  (7) of Section 621A confers jurisdiction on the court to accord
B permission for compounding of the offence punishable with
  imprisonment or with fine or with both, the jurisdiction of the
  Company Law Board is excluded and, therefore, the Company
  Law Board erred in acceding to the request of the accused for
  compounding of the offence. Sub-section (1) of Section 621A
C and sub-section (7) thereof are differently worded but on their
  close reading it is evident that both cover such offences
  depending upon the nature of punishment. Sub-section (1) of
  Section 621A excludes offence punishable with imprisonment
  only or with imprisonment and also fine and includes the
D residue offences which will obviously include offence
  punishable with imprisonment or with fine or with both whereas
  sub-section (7) specifically include those and excludes, like sub-
  section (1), offences punishable with imprisonment only or with
  imprisonment and also fine. Therefore, both cover similar nature
E of offences. Hence, the power for compounding can be
  exercised in relation to the same nature of offences by the
  Company Law Board or the court in seisin of the matter with
  the difference-that the Company Law Board can proceed to
  compound such offence either before or after the institution of
F any prosecution. In this connection, it shall be relevant to refer
  to Section 621A(4)b) of the Act, which provides that where any
  offence is compounded under this section, whether before or
  after the institution of any prosecution, an intimation thereof shall
  be given by the Company to the Registrar within 7 days from
G the date on which the offence is compounded. Section
  621A(4)d) mandates that where the composition of any offence
  is made after the institution of any. prosecution, such
  composition would be brought by the Registrar in writing to the
  notice of the court in which the prosecution is pending and on
H such notice of the composition of the offence being given, the
       V.L.S. FINANCE LTD. v. UNION OF INDIA & ORS.                861
              [CHANDRAMAULI KR. PRASAD, J.]
    accused in relation to whom the offence is so compounded              A
    shall be discharged.
          15. From the conspectus of what we have observed above,
    it is more than clear that an offence committed by an accused
    under the Act, not being an offence punishable with
    imprisonment only or imprisonment and also with fine, is B
    permissible to be compounded by the Company Law Board
    either before or after the institution of any prosecution. In view
    of sub-section (7) of Section 621A, the criminal court also
    possesses similar power to compound an offence after
    institution of the prosecution.                                    C
           16. Now the question is whether in the aforesaid
    circumstances the Company Law Board can compound offence
    punishable with fine or imprisonment or both without permission
    of the court. It is pointed out that when the prosecution has been    D
    laid, it is the criminal court which is in seisin of the matter and
    it is only the magistrate or the court in seisin of the matter who
    can accord permission to compound the offence. In any view
    of the matter, according to the learned counsel, the Company
    Law Board has to seek permission of the court and it cannot
    compound the offence without such permission. This line of            E
    reasoning does not commend us. Both sub-section (1) and sub-
    section (7) of Section 621A of the Act start with a non-obstante
    clause. As is well known, a non-obstante clause is used as a
    legislative device to give the enacting part of the section, in
    case of conflict, an overriding effect over the provisions of the     F
    Act mentioned in the non-obstante clause.


•
         17. Ordinarily, the offence is compounded under the
    provisions of the Code of Criminal Procedure and the power
    to accord permission is conferred on the court excepting those G
    offences for which the permission is not required. However, in
    view of the non-obstante clause, the power of composition can
    be exercised by the court or the Company Law Board. The
    legislature has conferred the same power to the Company Law
    Board which can exercise its power either before or after the H
    862      SUPREME COURT REPORTS                    [2013] 8 S.C.R.


A institution of any prosecution whereas the criminal court has no
  power to accord permission for composition of an offence
  before the institution of the proceeding. The legislature in its
  wisdom has not put the rider of prior permission of the court
  before compounding the offence by the Company Law Board
B and in case the contention of the appellant is accepted, same
  would amount to addition of the words "with the prior
  permission of the court" in the Act, which is not permissible.
       18. As is well settled, while interpreting the provisions of
  a statute, the court avoids rejection or addition of words and
C resort to that only in exceptional circumstances to achieve the
  purpose of Act or give purposeful meaning. It is also a cardinal
  rule of interpretation that words, phrases and sentences are to
  be given their natural, plain and clear meaning. When the
  language is clear and unambiguous, it must be interpreted in
D an ordinary sense and no addition or alteration of the words or
  expressions used is permissible. As observed earlier, the
  aforesaid enactment was brought in view of the need of leniency
  in the administration of the Act because a large number of
  defaults are of technical nature and many defaults occurred
E because of the complex nature of the provision.
          19. From what we have observed above, we are of the
    opinion that the power under sub-section (1) and sub-section
    (7) of Section 621A are parallel powers to be exercised by the
F   Company Law Board or the authorities mentioned therein and
    prior permission of Court is not necessary for compounding the
    offence, when power of compounding is exercised by the
    Company Law Board. In view of what we have observed above,
    the order impugned does not require any interference by this
    Court.
G
          20. In the result, we do not find any merit in the appeal and
    it is dismissed accordingly but without any order as to costs.
    K.K.T.                                        Appeal dismissed.
H