The government looks set to let 85-90% of minor violations related to the Companies Act be dealt outside the court, while leaving 34 sections of the law – which concern serious offences and provide for fine and imprisonment – untouched.
Sources told TOI that out of 470 provisions of the Companies Act, 136 have penal provisions for various violations. Of these, 18 can be adjudicated in-house and 118 sections of the law cover prosecution to be filed in various forums for other offences.
Violations by companies – both large and small – have resulted in nearly 45,000 cases ending up in courts and the NCLT, of which around 75% are related to non-filing of annual returns and balance sheet. Only 1,500-2,000 relate to serious offences that are dealt with by 34 sections, which are non-compoundable and carry monetary penalty as well as imprisonment.
The ministry of corporate affairs, which has set up a high-profile panel to clean up the law, is looking at 84 sections that are compoundable, with 43 of them condoned only on payment of fine. The remaining 41 come with the possibility of either fine or jail.
In line with the government’s philosophy, the panel will review how there can be an easier dispensation for the compoundable offences with little discretion to the registrar of companies or authorities responsible for levying fine. At the same time, the government intends to continue with its plan to crack down on serious offenders.
It has wound up 2.5 lakh companies that were not filing returns – suspecting them of being “shell companies” engaged in routing of illegal funds. It has issued notices to another 2.3 lakh companies for similar violations this year. Besides, a penalty of Rs 100 a day has been introduced for those who do not file returns on time.
“Only 15-20 provisions are responsible for pile-up of cases. The panel will see if it makes sense to have a traffic challan kind of a system, where minor offenders are let off after paying fine,” said a source.
Source : Times of India