September 2019

HIGHLIGHTS OF THE COMPANIES (AMENDMENT) ACT, 2019

Pramod S. Prabhudesai
Chartered Accountant

BACKGROUND

The Companies Act, 2013 (CA 2013) was enacted with a view to consolidate and amend the law relating to companies and it is now six years since its notification. However, it was observed that a large numbers of cases concerning compoundable offences are pending in the trial courts. Various settlement schemes were introduced in the past (in 2000, 2010 and 2014) to reduce the pendency of cases. The Vaish Committee constituted in 2005 even recommended withdrawal of cases where larger public interest was not involved. It was noted at that time that pendency every year was steadily increasing by about 2,000 cases, the average period of disposal of cases was five years and the average cost awarded per case to the government was alarming Rs 5731.

 

It was further noted that under CA 2013 there are 18 instances where defaults are subject to civil liability by levying penalties through the adjudication mechanism. These broadly relate to technical non-compliances. It was then felt that this list was not exhaustive and there are other defaults which are also procedural / technical in nature and these can be rectified by levy of penalty instead of prosecution in the courts. This would incentivise enhanced compliance. In this backdrop, a committee was constituted in July, 2018 under the chairmanship of Injeti Srinivas (at present Secretary in the MCA).

 

The terms of reference of the committee were:

(i) Examine the nature of all acts categorised as compoundable offences (those which are punishable with fine only or with fine or imprisonment, or both) and recommend whether they can be re-categorised as acts which attract civil liabilities and thus be liable for penalty;

(ii) To review non-compoundable offences and recommend whether they can be re-categorised as compoundable offences;

(iii) Review the existing mechanism of levy of penalty under CA 2013 and suggest improvements therein;

(iv) To lay down the broad contours of an in-house adjudicatory mechanism wherein penalties can be levied in a non-discretionary manner;

(v) Suggest changes in the law and matters incidental thereto.

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