MCA Panel may Offer Penal Relief for Some Offences

FOCUS ON SERIOUS CASES UNDER COMPANIES ACT

Committee will look at decriminalising certain offences & resolving most cases without approaching courts

The government is looking to decriminalise some of the offences in the Companies Act of 2013 so that courts are freed of these cases to focus on more important ones. The ministry of corporate affairs (MCA) has set up a 10-member committee to review the penal provisions in the Act. The committee, to be headed by the MCA secretary, may propose decriminalisation and suggest ways in which to replace the provisions with an in-house mechanism, where a penalty could be levied in instances of default. “This would also allow the trial courts to pay more attention on offences of serious nature,” MCA said in a statement.

The committee, which has Uday Kotak, Shardul S Shroff, Sidharth Birla and Bankruptcy Law Reforms Committee chairman TK Vishwanathan among its members, will submit its report with recommendations within 30 days to the government. The committee will see if existing compoundable offences in the Companies Act can be considered as ‘civil wrongs’ or ‘defaults’ where a penalty by an adjudicating officer can be levied. Only consequent to further non-compliance of the order of such authority will it be categorised as an offence that can be tried by a special court. Compoundable offences are those that are punishable with just a fine or with a fine or imprisonment or both.

The panel will look into the possibility of making several non-compoundable offences — offences punishable with imprisonment only, or punishable with imprisonment and also with a fine — compoundable where just a fine is levied.

A Welcome Move

“The committee will examine the existing mechanism of levy of penalty and suggest any improvements along with laying down the broad contours of an in-house adjudicatory mechanism where penalty may be levied in an MCA21-system driven manner, so that discretion is minimised,” the statement said. “It will also take necessary steps in formulation of draft changes in the law.” A legal expert welcomed the move. “There are certain instances under the Companies Act where a simple typographical mistake in filings could be categorised as fraud and accordingly the penalty is quite rigorous,” said Anshul Jain, partner, Luthra & Luthra. “It’s a good thing that government is liberalising certain aspects of the law.”

The government wants to see disputes resolved without having to approach the courts. “There are several offences that have fine as penalty or fine with penal provisions,” a government official said. “In certain cases of defaults, the government is planning to remove the penal provision and just impose the fine. Only consequent to further non-compliance of the order will it be categorised as an offence triable by a special court. We are looking at resolving most cases in-house without going to the courts. This would also allow the trial courts to pay more attention on offences of serious nature.”

The Economic Times, 16th July 2018, New Delhi