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New Delhi : The Committee constituted by Government of India in July 2018 to review the existing framework dealing with offences under the Companies Act, 2013, and related matters and make recommendations to promote better corporate compliance, submitted its report here on August 27, 2018. The report was presented to the Union Minister for Finance & Corporate Affairs Arun Jaitley by Secretary, Ministry of Corporate Affairs, Injeti Srinivas, who chaired the committee.
The Committee undertook a detailed analysis of all penal provisions, which were then broken down into eight categories based on the nature of offences. The Committee recommended that the existing rigour of the law should continue for serious offences, covering six categories, whereas for lapses that are essentially technical or procedural in nature, mainly falling under two categories may be shifted to in-house adjudication process. The Committee observed that this would serve the twin purposes promoting of ease of doing business and better corporate compliance.
It would also reduce the number of prosecutions filed in the Special Courts, which would, in turn, facilitate speedier disposal of serious offences and bring serious offenders to book. The cross-cutting liability under section 447, which deals with corporate fraud, would continue to apply wherever fraud is found, according to a PIB release.
The report, inter alia, makes recommendations for de-clogging the National Company Law Tribunal (NCLT) through significant reduction in compounding cases before the Tribunal. In addition, the report also touches upon certain essential elements related to corporate governance such as declaration of commencement of business, maintenance of a registered office, protection of depositors’ interests, registration and management of charges, declaration of significant beneficial ownership, and independence of independent directors.
The main recommendations of the Committee include Restructuring of Corporate Offences to relieve Special Courts from adjudicating routine offences, re-categorization of 16 out of the 81 compoundable offences by shifting them from the jurisdiction of special courts to an in-house E-adjudication framework wherein defaults would be subject to levy of penalty by the authorised adjudicating officer (Registrar of Companies), remaining 65 compoundable offences to continue under the jurisdiction of special courts due to their potential misuse, and status quo recommended in respect of all non-compoundable offences, which relate to serious corporate offences.