Compounding of offence is a process whereby the person/entity committing default will file an application to the compounding authority accepting that it has committed an offence and so that same should be condoned. The compounding authority may compound the offence and ask the defaulting party to deposit compounding fee as decided by it on case to case basis. Once the said compounding fee is paid, the defaulting will no more be treated in default of the offence which has been so compounded.
Under the Act, the compounding authority shall be either Regional Director or National Company Law Tribunal. An offence shall be compounded by Regional Director where the maximum amount of fine which may be imposed for such offence does not exceed INR 25,00,000. All offences where the maximum amount of fine which may be imposed for such offence exceed INR 25,00,000 shall be compounded by National Company Law Tribunal.