Compounding of Offences — a legal alternative to prosecution
A statutory mechanism that lets companies and officers in default settle a non-compliance by paying a compounding fee — avoiding prolonged criminal proceedings before the special courts. S & S Associates handle it end to end, from default assessment to representation before the RD or NCLT.
In short
Compounding under Section 441 of the Companies Act, 2013 lets a company or officer in default settle a fine-punishable offence by paying a compounding fee instead of facing prosecution. The Regional Director handles matters where the maximum fine is up to ₹25 lakh; the NCLT handles higher ones. The amount paid is not a penalty and does not disqualify a director.
Fine threshold that decides RD versus NCLT jurisdiction
To intimate the compounding order to the RoC via INC-28
Penalty on a repeat of the same offence within the window
Window after which a repeat offence counts as a first offence
Settle the default, avoid the courtroom
Compounding is a settlement whereby a company or officer in default, on committing an offence punishable with fine under the Companies Act, 2013, approaches the competent authority — the NCLT or Regional Director — to pay a compounding fee in lieu of prosecution. The compounded amount is not a penalty and shall not be the basis for disqualification of any director.
The ₹25 lakh fork in the road
Jurisdiction turns on the maximum fine that may be imposed under the relevant section — not the actual fine levied or proposed.
Regional Director
Where the maximum fine that may be imposed does not exceed ₹25 lakh, the Regional Director — or an officer authorised by the Central Government — compounds the offence, under Section 441(1)(b).
Faster route for lower-value defaultsNCLT
Where the maximum fine exceeds ₹25 lakh, the National Company Law Tribunal compounds the offence, under Section 441(1)(a), after hearing the parties.
Tribunal route for higher-value defaultsSection 441 — quick reference
The sub-sections that govern how, when and by whom an offence is compounded — as amended by the Companies (Amendment) Act, 2019.
Where the maximum fine exceeds ₹25 lakh, the NCLT shall compound the offence.
Where the maximum fine does not exceed ₹25 lakh, the Regional Director or an authorised officer shall compound it.
An application may be filed before or after prosecution; any prosecution is stayed pending the compounding order.
Every application is made to the Registrar of Companies, who forwards it to the NCLT or RD as the case may be.
Where an offence is compounded, intimation is given to the RoC within 7 days of the order being available to the applicant.
An officer or director is disqualified from office if an investigation under Sections 210–229 is pending.
A repeat of the same offence attracts twice the penalty; the 3-year window runs from the date of the compounding order.
Offences punishable with imprisonment only, or with imprisonment and fine, are not compoundable.
From default to compounding order
A clear, filing-by-filing path — with the right e-Form mapped to each stage.
Assess the default
Identify the offence and, crucially, the maximum prescribed fine — this decides whether the RD or the NCLT is the competent authority.
Board resolution
Pass a board resolution authorising the compounding application and appointing an authorised representative.
File the application e-Form GNL-1
Make the application to the Registrar of Companies, who forwards it to the RD or NCLT under Section 441(3)(a).
Hearing before RD / NCLT
The authority hears the parties and may compound the offence on payment of the compounding fee it fixes.
Compounding order
The RD or NCLT passes a speaking order recording the compounding and the fee payable in lieu of prosecution.
Intimate the RoC e-Form INC-28
File the order with the Registrar within 7 days of it being made available, under Section 441(3)(b).
What can — and cannot — be compounded
Not every default qualifies. Section 441(6) draws a firm line.
Compoundable
- Offences punishable with fine only under the Companies Act, 2013
- Applications filed before or after prosecution has begun
- Joint applications by the company and its officers in default
- Matters routed to the RD (≤ ₹25 lakh) or the NCLT (> ₹25 lakh)
Not compoundable
- Offences punishable with imprisonment only
- Offences punishable with imprisonment and fine
- Where an investigation under Sections 210–229 is pending
- Applications that do not satisfy the statutory conditions
End-to-end compounding advisory
From the first assessment to the final filing, our Company Secretaries carry the matter for you.
Default & threshold assessment
We pin down the offence and the maximum prescribed fine to fix the right authority and route.
Board resolution drafting
Resolutions authorising the application and appointing an authorised representative.
Application & GNL-1 filing
Drafting the compounding application and filing e-Form GNL-1 with the Registrar of Companies.
Representation before RD / NCLT
Appearing and making submissions before the Regional Director or the Tribunal on your behalf.
Post-order INC-28 filing
Intimating the compounding order to the RoC within the seven-day statutory window.
Ongoing compliance advisory
Guidance to prevent a repeat within the three-year window and keep future filings clean.
Common queries on compounding
What is compounding of offences under the Companies Act, 2013?
Compounding is a settlement mechanism under Section 441 whereby a company or an officer in default, on committing an offence punishable with fine, pays a compounding fee to the competent authority — the Regional Director or the NCLT — in lieu of prosecution. The amount paid is not a penalty and does not, by itself, disqualify a director.
Who compounds the offence — the Regional Director or the NCLT?
Where the maximum fine that may be imposed does not exceed ₹25 lakh, the Regional Director (or an officer authorised by the Central Government) compounds the offence. Where it exceeds ₹25 lakh, the NCLT compounds it. The threshold is fixed by the maximum prescribed fine, not the actual fine levied or proposed.
Can a compounding application be filed after prosecution has started?
Yes. Section 441(2) allows an application either before or after institution of prosecution. Where prosecution has begun, it is stayed on filing and the proceedings abate once the compounding order is made.
Does compounding lead to director disqualification under Section 164?
No. The compounding fee is expressly not a penalty, and paying it does not attract disqualification of a director under Section 164 of the Companies Act, 2013.
Which offences are not compoundable?
Under Section 441(6), offences punishable with imprisonment only, or with imprisonment and fine, are not compoundable. Compounding is also barred where an investigation under Sections 210 to 229 is pending against the applicant.
What happens if the same offence is repeated after compounding?
If the same offence is committed again within three years of the compounding order, the company or officer is liable to twice the penalty. After three years, a repeat offence is treated as a first offence and the penalty is not doubled.
Need expert assistance with compounding?
From default assessment and board resolution drafting to representing your company before the RD or NCLT — talk to our team for a confidential, no-obligation discussion.
Book Free ConsultationThis page is for general information only and does not constitute legal advice. The provisions and procedures described are based on Section 441 of the Companies Act, 2013 as amended, and the position may change with further amendments, rules or judicial interpretation. Please seek formal advice for your specific matter.