Tag Archives: penalty

Penalty for Frauds – By an Officer of the Company

Under Section 241(2) of the Companies Act, 2013, the Central Government, if it is of the opinion that the affairs of the Company are being conducted in a manner prejudicial to public interest, may apply itself to the Tribunal for orders under the said Chapter, which is headed “prevention of Oppression and Mismanagement”. Apart from the vast powers that are given to the Tribunal under Section 242, powers under Sections 337 and 339 are also given in aid of this power, which will apply mutatis mutandis.         Section 337 of the Companies Act refers to penalty for frauds by an officer of the Company in which mismanagement has taken place. Likewise, Section 339 refers to any business of the company which has been carried on with intent to defraud creditors of that company. Obviously, the persons referred to in Section 339(1) as persons who are other than the parties “to the carrying on of the business in the manner aforesaid” which again refers to the business of the company which is being mismanaged and not to the business of another company or other persons. Usha Ananthasubramanian v. Union of India, (2020) 4 SCC 122.

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Filed under Companies Act, 2013, Penalty for Fraud

Competition Act – No Requirement of Mens Rea under Section 43-A

There was no requirement of mens rea under Section 43-A or an intentional breach as an essential element for levy of penalty. The Act does not use the expression “the failure has to be wilful or mala fide” for the purpose of imposition of penalty. The breach of the provisions of the Act is punishable and considering the nature of the breach, it is discretionary to impose the extent of penalty. Mens rea is important to adjudge criminal or quasi-criminal liability, not in case of violation of the civil statutory provision.

In Hindustan Steel Ltd. v. State of Orissa [Hindustan Steel Ltd. v. State of Orissa, (1969) 2 SCC 627 : AIR 1970 SC 253] , with respect to the failure to comply with the civil obligation it was laid down thus:

mens rea is not an essential ingredient for contravention of the provision of a civil Act. The penalty is attracted as soon as a contravention of the statutory obligations as contemplated by the Act is established and, therefore, the intention of the parties committing such violation becomes immaterial. In other words, the breach of a civil obligation which attracts penalty under the provisions of an Act would immediately attract the levy of penalty irrespective of the fact whether the contravention was made by the defaulter with any guilty intention or not. This apart that unless the language of the statute indicates the need to establish the element of mens rea, it is generally sufficient to prove that a default in complying with the statute has occurred. The penalty has to follow and only the quantum of penalty is discretionary.

The penalty is attracted as soon as the contravention of the statutory obligation as contemplated by the Act and the Regulation is established and hence intention of the parties committing such violation becomes wholly irrelevant.

Unless the language of the statute indicates the need to establish the presence of mens rea, it is wholly unnecessary to ascertain whether such a violation was intentional or not.

The imposition of penalty under Section 43-A is on account of breach of a civil obligation, and the proceedings are neither criminal nor quasi-criminal. Thus, a penalty has to follow. Discretion in the provision under Section 43-A is with respect to quantum. SCM Solifert Ltd. v. CCI, (2018) 6 SCC 631

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Filed under Competition Act, No Requirement of Mens Rea, Uncategorized

Disciplinary Proceedings – Against a Retired Employee

In Anant R. Kulkarni v. Y.P. Education Society, 2013 (138) FLR 168 (SC), the Hon’ble Apex Court considered the question as to whether continuation of departmental enquiry is permissible against a retired employee, wherein it was held that enquiry against a retired employee is subject to the statutory rules, which governs the terms and conditions of his service. If the inquiry was initiated while the delinquent employee was in service, it would continue even after his retirement but, nature of punishment would be limited to certain extent and accordingly, punishment of dismissal or removal of the employee from service cannot be imposed on the retired employee. The Hon’ble Supreme Court has categorically ruled that in the absence of any statutory power conferred on the management, to hold a fresh enquiry after the retirement, no such enquiry against the employee could be conducted. In the aforesaid decision, the Apex Court has decided the issue thus:
“Thus, it is evident from the above, that the relevant rules governing the service conditions of an employee are the determining factors as to whether and in what manner the domestic enquiry can be held against an employee who stood retired after reaching the age of superannuation. Generally, if the enquiry has been initiated while the delinquent employee was in service, it would continue even after his retirement, but nature of punishment would change. The punishment of dismissal/removal from service would not be imposed. S. Andiyannan v. Joint Registrar, Co-operative Societies, 2015 (146) FLR 1079 (FB).

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Filed under Departmental Enquiry, Retired Employee

Reasonable Compensation – Liquidated Amount

Where a sum is named in a contract as a liquidated amount payable by way of damages, the party complaining of a breach can receive as reasonable compensation such liquidated amount only if it is a genuine pre-estimate of damages fixed by both parties and found to be such by the court. In other cases, where a sum is named in a contract as a liquidated amount payable by way of damages, only reasonable compensation can be awarded not exceeding the amount so stated. Similarly, in cases where the amount fixed is in the nature of penalty, only reasonable compensation can be awarded not exceeding the penalty so stated. In both cases, the liquidated amount or penalty is the upper limit beyond which the court cannot grant reasonable compensation. Kailash Nath Associates v. D.D.A., (2015) 4 SCC 136.

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Filed under Contract Law, Liquidated Amount