Sections 439, 440, 441, 446A, 446B, 447 and 458 of the Companies Act 2013

Section 439 - Offences to be non-cognizable

Meaning: Section 439 regulates prosecution of offences under the Companies Act, 2013 and specifies the persons on whose complaint a court may take cognizance, subject to the statutory exceptions.

Change made by the Companies (Amendment) Act, 2017

Section 88 of the 2017 Amendment Act amended Section 439(2) by inserting the words "or a member" after the words "a shareholder". The amendment therefore expressly recognised a complaint by a member for the purpose covered by sub-section (2).

Section 440 - Transitional provisions

Meaning: Section 440 deals with the transition of specified pending company-law criminal proceedings to the appropriate Special Court or other competent criminal court.

Change made by the Companies (Amendment) Act, 2017

Section 89 of the 2017 Amendment Act replaced the references to "Court of Session" with references to the "Court of Session or the Court of Metropolitan Magistrate or a Judicial Magistrate of the First Class, as the case may be". This aligned the transitional provision with the jurisdictional structure applicable to offences under the Act.

Section 441 - Compounding of certain offences

Meaning: Compounding is a statutory mechanism by which an eligible offence may be settled in accordance with Section 441 instead of being carried through ordinary prosecution, subject to the conditions, monetary limits and exclusions specified in the Act.

Change made in 2017

Section 90 of the Companies (Amendment) Act, 2017 broadened the wording of Section 441(1) by replacing the earlier reference to offences punishable "with fine only" with a formulation excluding offences punishable with imprisonment only or with imprisonment and also with fine.

Later amendments

The Companies (Amendment) Act, 2019 further amended Section 441, including the monetary threshold in Section 441(1)(b) and the statutory exclusion from compounding for offences punishable with imprisonment only or with imprisonment and also with fine. The Companies (Amendment) Act, 2020 later substituted Section 441(5). Accordingly, the current text of Section 441 should be consulted before relying on the 2017 wording.

Section 446A - Factors for determining level of punishment

Meaning: Section 446A requires the court or Special Court, while deciding the amount of fine or imprisonment under the Companies Act, to have due regard to statutory factors relevant to the seriousness and context of the default.

The provision, inserted by Section 91 of the Companies (Amendment) Act, 2017, identifies the following factors:

• size of the company;
• nature of business carried on by the company;
• injury to public interest;
• nature of the default; and
• repetition of the default.

The provision is intended to ensure that punishment is considered with reference to the circumstances identified by Parliament rather than solely by the existence of a default.

Section 446B - Lesser penalties for certain companies

Meaning: Section 446B provides a reduced penalty regime for specified classes of companies and persons connected with them when a penalty is payable for non-compliance with the Companies Act.

Under the substituted provision, where a penalty is payable for non-compliance with any provision of the Act by a One Person Company, small company, start-up company or Producer Company, or by its officer in default or another person in respect of such company, the penalty is limited to not more than one-half of the penalty specified for the relevant non-compliance. The statutory ceiling is two lakh rupees for the company and one lakh rupees for an officer in default or other person, as applicable.

The section also contains explanations for "Producer Company" and "start-up company". For compliance or litigation, the current statutory text and the provision creating the underlying penalty should be read together.

Section 447 - Punishment for fraud

Meaning: Section 447 is the principal penal provision for fraud under the Companies Act, 2013. The section prescribes punishment for fraud and contains a statutory explanation describing "fraud" in relation to the affairs of a company or body corporate.

Change made in 2017

Section 92 of the Companies (Amendment) Act, 2017 introduced a monetary threshold into the main punishment provision and created a separate treatment for fraud below the specified threshold where public interest is not involved.

Later change in 2019

The Companies (Amendment) Act, 2019 increased the maximum fine in the second proviso for the lower-value, non-public-interest category from twenty lakh rupees to fifty lakh rupees. The current Section 447 should therefore be used for present-day advice, prosecution or compliance analysis rather than reproducing the 2017 text alone.

Section 458 - Delegation by Central Government of its powers and functions

Meaning: Section 458 authorises the Central Government, by notification and subject to stated conditions, limitations and restrictions, to delegate specified powers and functions under the Companies Act to authorities or officers identified in the provision.

Change made by the Companies (Amendment) Act, 2017

Section 93 of the 2017 Amendment Act omitted the proviso to Section 458(1). The amendment removed that proviso from the delegation provision.