Section 39 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Compounding lets a person suspected of an offence pay a sum fixed within the statute and have the matter closed without prosecution. The 2021 Act substituted section 39 in full. Compounding is now done by the Regional Director, or an officer not below that rank authorised by the Central Government, on an application made through the Registrar, and the section adds a three-year bar, a seven-day intimation duty and a twice-the-fine rule for those who ignore the order. If you have a default that may be compounded, our dispute resolution team can help you prepare the application.
The Regional Director, or any other officer not below the rank of Regional Director authorised by the Central Government, may compound any offence punishable with fine only, by collecting a sum which may extend to the maximum fine for the offence but shall not be lower than the minimum (s.39(1)). No compounding for a similar offence within three years of an earlier compounding (s.39(2)). The application goes to the Registrar, who forwards it with comments (s.39(3)). Intimation to the Registrar within seven days (s.39(4)). If a direction to file or register is not complied with, the maximum fine becomes twice the amount in the corresponding section (s.39(8)).
Before and after 2021
Before the 2021 amendment, section 39 was a single sentence: the Central Government could compound any offence under the Act punishable with fine only, by collecting a sum which might extend to the maximum fine prescribed for the offence. Clause 16 of the 2021 Act substituted that section with the eight sub-sections below. The old text had no minimum sum, no three-year bar, no procedure and no officer named.
Section 39(1): who may compound, and for what
"Notwithstanding anything contained in the Code of Criminal Procedure, 1973", the Regional Director or any other officer not below the rank of Regional Director authorised by the Central Government may compound any offence under this Act which is punishable with fine only, by collecting from a person reasonably suspected of having committed the offence a sum which:
- may extend to the amount of the maximum fine provided for the offence, but
- shall not be lower than the minimum amount provided for the offence.
"Regional Director" is defined in section 2(1)(ra), inserted in 2021, as a person appointed as such by the Central Government for the purposes of this Act or the Companies Act, 2013.
Which offences? Only those "punishable with fine only". An offence that carries imprisonment is not within s.39(1) as worded. For example, section 37 (false statement) provides imprisonment and fine, so it is outside the sub-section, while section 34(6) and section 38(3) provide fine only. The 2021 Act converted many other defaults into penalties dealt with by adjudicating officers under section 76A; check how the section in question is worded.
Note on procedure code: the Code of Criminal Procedure, 1973 is referred to as written in the Act. From 1 July 2024 it was replaced by the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS).
Section 39(2): the three-year bar
Sub-section (1) does not apply to an offence committed by an LLP, its partner or its designated partner within three years from the date on which a similar offence committed by it or him was compounded under this section.
The Explanation clarifies that any second or subsequent offence committed after the expiry of three years from the date of the earlier compounding is deemed to be the first offence.
Example. Kumar & Dutta LLP compounds a default on 10 June 2026. It commits a similar default on 20 March 2028. That is within three years of 10 June 2026, so s.39(1) does not apply to the 2028 offence. If it commits a similar offence after 10 June 2029, it is treated as a first offence.
Section 39(3): the application
"Every application for the compounding of an offence shall be made to the Registrar who shall forward the same, together with his comments thereon, to the Regional Director or any other officer not below the rank of Regional Director authorised by the Central Government, as the case may be."
So the applicant files with the Registrar, not directly with the Regional Director. The form is dealt with in our post on Form 31 under section 39. The Act's text gives no fee, form number or timeline for the application, and this article states no fee.
Section 39(4) to (6): intimation, bar on prosecution, discharge
| Sub-section | Rule |
|---|---|
| 39(4) | Where an offence is compounded, whether before or after prosecution is instituted, intimation shall be given to the Registrar within seven days of the compounding |
| 39(5) | Where compounded before prosecution is instituted, no prosecution shall be instituted for that offence |
| 39(6) | Where compounded after prosecution is instituted, the Registrar shall bring the compounding in writing to the notice of the court; the offender in relation to that offence shall be discharged |
Sub-section (4) does not say who must give the intimation; check the order and the current rules.
Section 39(7) and (8): directions and the doubling rule
(7) While dealing with a proposal for compounding, the Regional Director or authorised officer may, by an order, direct any partner, designated partner or other employee of the LLP to file or register, or on payment of the fee or additional fee required under the Act, such return, account or other document within such time as the order specifies.
(8) If a partner, designated partner or other employee fails to comply with an order under sub-section (7), then the maximum amount of fine for the offence under consideration shall be twice the amount provided in the corresponding section in which the punishment for that offence is provided.
So compounding is tied to cure. The officer can require the missing document to be filed. If that direction is ignored, the ceiling for the compounding sum doubles. For an offence with a fine range of Rs 25,000 to Rs 5 lakh, for instance, the maximum under sub-section (8) would be twice Rs 5 lakh. The sub-section speaks of the maximum; it does not say that the minimum changes.
Practical points
- Check first whether the default is an offence punishable with fine only or a penalty to be adjudicated.
- Cure the default as part of the application, since s.39(7) allows a direction to do so.
- Diary the seven-day intimation and the compounding date; the three-year bar runs from it. For courts, see sections 77 and 77A.
Need help with compounding?
Compounding rests on choosing the right offence, applying through the Registrar and curing the default so that the order is complied with. Our dispute resolution team can examine the default, prepare the application and track the seven-day intimation.
Key takeaways
- Section 39 was substituted by the 2021 Act; before that, the Central Government could compound offences punishable with fine only.
- The Regional Director (or officer not below that rank, authorised) compounds offences punishable with fine only (s.39(1)).
- The sum lies between the minimum and the maximum fine for the offence.
- No compounding for a similar offence within three years of an earlier compounding (s.39(2)).
- Apply to the Registrar; intimation within seven days of compounding (s.39(3), (4)).
- Ignoring a direction under s.39(7) doubles the maximum fine (s.39(8)).
Read next
- Section 38: Registrar's power to obtain information
- Sections 40 and 41: destruction of old records and enforcing returns
- Form 31 under section 39: compounding an offence under the LLP Act
- Compounding of offences under the LLP Act
Disclaimer: Based on the Limited Liability Partnership Act, 2008 as amended by the Limited Liability Partnership (Amendment) Act, 2021, as consulted on 1 October 2026. Forms, fees and procedure are set by the LLP Rules, 2009 as amended from time to time. This article is general information, not legal advice; check the official text before acting.