M/s. Sand Land Real Estate P Ltd. Case

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The core pillar of good corporate governance is in the hand of the Directors of the company. Directors are the primary players in maintaining the transparency of the affairs of the company. Apart from that the lower-level management is the executer of the transparency mechanism in the company. It is in fact might be right to say that the shareholder’s activism has led to the significance of the corporate governance in today’s era. Viable corporate administration requires an unmistakable comprehension of the individual parts of the board, the executives and investors; their associations with one another; and their associations with other corporate partners. Following this line of contention, the paper tires to draw an accentuation on the significance of Corporate administration in India.

The Companies Act of 2013 significantly expands the number of committees compared to the Companies Act of 1956. The functions and duties of committees are specifically defined in this Act, which were not defined in the Companies Act of 1956.The word “committees” refers to a group or organisation of people who collaborate to accomplish a common goal and perform a specific task that necessitates expert knowledge. In addition, all members of these committees are required to have technical and advanced experience with the committee’s operation. It is important to remember, however, that a committee is only responsible for carrying out the function and task that the Board of Directors has assigned to it (BOD). That means that the ultimate authority rests solely with the BOD.

With the methodology of globalization and the clouding of geological lines have made enormous solicitations on the Boards of Directors, to the extent their time, obligation and required scopes of capacities. The regulatory necessities are staggering and the onus on the Boards is huge and subsequently, it is basic to assign certain issue to master board warning advisory groups.

These boards with officially settled terms of reference, criteria for appointment, life range, job and capacities, comprise a significant component of the administration cycle. Panels empower better administration of full load up’s time and permit inside and out examination and centred consideration, which will lead eventually to develop appropriate strategies.

In large organizations participation of every single director is beyond the realm of imagination in choices making of the association all in all, a board of trustees is enabled to decide, go through cash, or make moves. A few or all such powers might be restricted or adequately limitless. Individuals from the board of trustees take choices, keeping in see the interest, everything being equal. The present stands a good example to review and understand the concepts relating to the independent directors, different committees in the company and the important of independent directors and board of directors.

Facts of the Case

The present case filed on the grounds that the company has violated section 149, 177 and 178 of the Companies Act, 2013. The compounding application was initiated by the National company law tribunal.

M/s Sand Land real estates is a private limited company incorporate in the year 2010. Further it was made to be public limited company under the Act.

The Roc Mumbai further prepared its report on the same and filed it report before the NCLT. The company has failed to appoint the Independent director and there has been a delay of 303 days which eventually led to violation of section 149.

Pursuant to that the company further failed to formulate the Audit committee and Nomination and the remuneration committee under section 177 & 178 respectively of the Companies Act, 2013.

Hence the present application.

Issues raised

The issue that arose for consideration before the bench is that;

Whether the present company has violated the provisions of the Companies Act, 2013.

Decision of the Court

The Hon’ble Tribunal on the basis of facts and circumstances held that the compounding fee of Rs. 5000 by each application who is default for the violation of Section 149. Pursuant to the violation of section 177 and section 178 the court again ordered a compounding fee of Rs. 5000.


Through the present case which deals with the section 149, 177 and 178 of the Companies Act, 2013 it becomes important to understand the concepts such as compounding offences, different committees in the companies act according to the relevance of the present case and the importance of the independent director.

Compounding offences:

Compounding of an offense is a repayment component by which the default party is given a choice to cash in lieu of his indictment accordingly to stay way from the litigation process. Compounding of offences under the Companies Act, 2013 is a cycle whereby the defaulting party settles a matter including default of arrangements of the act on instalment of such while as determined by the suitable power to stay away from the prosecution established or initiated.

Section 441 of the Act deals with compounding of offences committed by companies or any officer thereof. The Act classifies the following classes of offences, which can be compounded:

Offences punishable with fine.

Offences punishable with imprisonment or with fine.

Offences punishable with imprisonment or with fine or with both.

Segment 441 lays out the specific steps that a defaulting party must take in order to appeal to the appropriate authority for a compounding of an offence. The defaulting party being a company or an official in default has first to make an application for compounding in Form GNL-1 to the Registrar of Companies (ROC) (ROC).

Following the acceptance of the application, ROC is expected to submit something similar to the intensifying specialists being NCLT, based on the quantum of the most extreme fine required, as well as his remarks as a paper. When an offence is repeated, the agency will insinuate something close to ROC in Form INC-28 within 7 days of the offence being committed.

Furthermore, it is important to remember that when an offence is compounded by the relevant power and an indictment is pending against the defaulting party in the matter, the jurisdictional Registrar of Companies (‘ROC’) would be responsible for bringing the notice of compounding to the attention of the court where the arraignment is scheduled.

When the relevant court receives the ROC’s notice of compounding, the equivalent would equal the defaulting party’s release from the prosecution procedures. The part also states that where an offence has been compounded before the organisation of any procedure, no prosecution by the ROC or any investor of an organisation or individual approved by the Central Government can initiate based on the offence so compounded.

Nominal and remuneration committee:

A Board can set up committees with specific terms of reference when it needs help or when an issue requires more assets. They can also be set up for a particular reason or to manage general issues, for example, ‘advancement’. They can be set up on a present moment or impermanent premise, or they can be shaped as a perpetual body for progressing work.

The Board may designate the council executive or the panel individuals can pick/choose the administrator. The committee chairman is the way in to a successful committee, he establishes the pace, speed and systems of the panels’ working, thus executive chose ought to have persuasive and authority abilities and time responsibility expected of him.

In searching for an incredible director, most critical things are data and experience relevant to created by the board, shown activity and social capacities that will be essential if the board is to work suitably. The job of council director requires extra work, time for correspondence with advisory group people and senior organization so he remains instructed about the unforeseen developments and a capacity to decide conflicts among part. This will add to the huge development of the organization.

As council members, they will make decisions as a total assembling and hold joint commitment with respect to decisions and exercises taken by the board of trustees, even in their nonattendance. They are liable for ensuring that all decisions are taken to the best benefit of the organization and that their work is finished suitably. Singular individuals should show charitableness, decency, objectivity, duty, responsiveness, dependability and organization. This being the job of the council individuals, it gets important to for different advisory groups as recommended under the Companies Act, 2013.One such board is the Nomination and Remuneration Committee. This advisory group is needed to guarantee in addition to other things that compensation arrangements support the essential needs of the organization and all the more critically to lead execution assessment of each director.

Audit Committee:

Review Committee is one of the essential backbones of the corporate administration instrument in any organization. Blamed for the fundamental oversight of financial uncovering and disclosure, the Audit Committee intends to improve the trust in the trustworthiness of the association’s money related enumerating, the inside control cycles and system and the risk the board structures. Under the Companies Act, 1956, public organization in India having settled up capital of in any event rupees five crores was expected to set up an Audit Committee under Section 292A. The Clause 49 of the Listing Agreement, suitable just to the recorded associations, requires all recorded associations to appropriately contain an Audit Committee with an embraced set of obligations.

After the revision, Under the Companies Act, 2013 the Audit Committee’s organization is by and large not exactly equivalent to what was put down under Section 292A of the Companies Act 1956, and its degree and constitution have also been extended. The Act orders each enlisted and certain other class or classes of organizations to involve an Audit Committee.

In the Revised Clause 49 of the posting course of action beginning from first October, 2014, gives that survey board of recorded organization will have least three Directors as people. 66% of the people from review council will be independent Directors. All people from audit leading body of trustees will be monetarily capable and in any occasion one section will have bookkeeping or related monetary administration aptitude.

Clause 49[1] of the SEBI Listing Agreement mandates the companies to follow certain disclosures regarding the affairs of the company.  In the year 2003, the SEBI introduced major amendments to the Clause 49 of the Listing Agreement. In Clause 49 of the SEBI listing agreement, the corporate governance and compliance part has been categorised into various heads like the composition of the Board, Audit committee powers, the role of Audit committee, disclosure regulations, meeting of the various committee and few other compliances. Clause 49 II (D) explains that the Audit committee has to “oversight company’s financial reporting process and the disclosure of its financial information to ensure that the financial statement is correct, sufficient and credible

Independent director:

The main significance behind the appointment of independent directors[2] in the company is their capability of decision-making without any influence form the other stake holders. This leads to a higher level of transparency in the organization. It also leads to an effective composition of the board with independent judgement makers who do not hold any secret interest in the firm’s business. After the recommendations by the Kumar Birla committee[3] and recommendations of Narayan Murthy Committee[4], the Clause 49 was amended so as to include the independent director in the major decision-making process of the management of affairs of the banks and institutions. Having understood the importance of the independent director, it can be understood that in the present case what a gross violation it was to violate provisions related to Independent director.


A more prominent inspiration to prevail in the market rivalry makes the business organisations to utilize exploitative approaches to succeed which leads to the scams and frauds, one like PNB. A fruitful business can be distinguished through numerous elements. One such significant factor is to see how great the corporate governance systems are being followed. In the present case one such core necessity to achieve corporate governance being the audit committee was not established.

[1] Clause 49, SEBI Listing agreement.

[2] Section 149, Companies Act, 2013

[3] (Birla, 1999)

[4] (Murthy, 2003)

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