The Company Law Board (CLB) has rejected Reebok India’s application that sought compounding in violating certain sections of the Companies Act, 1956.
Compounding is a settlement process under which the accused pays compounding charges in lieu of undergoing consequences of lengthy prosecution. The sportswear maker had sought compounding for offences under Sections 159, 166, 220 and 210 of the Act.
These Sections relate to the preparation of annual returns within 60 days from the day of annual general meeting (AGM); holding AGM; filing balance sheet with registrar of companies (RoC) within 30 days of the AGM; and laying annual accounts and balance sheet before the company in AGMs, respectively.
However, the CLB in its order passed last week, said that although the violations were “technical in nature, it involves the element of criminality of financial scam… therefore the applicants herein do not deserve to get the benefit of composition of offence in terms of Section 621A of the Act and hence, the prosecution filed by the RoC and SFIO may proceed to its logical conclusion”.
According to Section 621A of the Act, offences punishable with only fines or with both fine and imprisonment, committed by a company or any officer can be compounded. An email sent by The Indian Express to the company on Monday for its comments remained unanswered.
Rejection of the compounding application would mean that Reebok India will have to undergo the prosecution filed by the RoC in Tis Hazari Court, Delhi, and the complaint filed by the Serious Fraud Investigation Office (SFIO) in the court of first class magistrate in Gurgaon, Haryana. The SFIO has filed the chargesheet against KPMG India affiliate and its auditing arm BSR & Co along with the sacked top executives of Reebok India, Subhinder Singh Prem and Vishnu Bhagat and 32 others, about two years after the ministry of corporate affairs ordered an investigation into the Reebok case in May 2012.