Lok Sabha Clears Bill To Decriminalize Minor Procedural Offences/ Technical Lapses Under Companies Act 2013 [Read Bill]

The Lok Sabha on Saturday passed the Companies (Amendment) Bill, 2020 to decriminalize minor procedural or technical lapses under the Companies Act, 2013, into civil wrong, with an aim to enhance the ease of doing business in India. It proposes to amend 64 provisions of the Act to make overall 75 changes. The Bill was introduced in the Lower House by Minister of Corporate Affairs, Nirmala Sitharaman during the Budget Session this year. However, that session was wound up early amid the pandemic and the Bill was finally taken up yesterday. As per the statement of Objectives annexed it, the Bill inter alia seeks to: decriminalise offences in case of defaults which can be determined objectively and which otherwise lack any element of fraud or do not involve larger public interest;empower the Central Government to de-list certain class of companies, in consultation with SEBI, primarily for listing of debt securities;Incorporate a new Chapter XXIA in the 2013 Act to govern Producer Companies (earlier governed by the 1956 Act);Set up new NCLAT Benches. Parliamentary Debate The Bill was largely supported by the House to enhance the ease of doing business in India. However, apprehensions were expressed that such decriminalization of offences may encourage "unbridled corporate culture" of covering up default by merely expending funds. The members thus consistently urged the Government to ensure that provisions of the Act are strictly implemented. AITC MP Prof. Sougata Roy said that the Act of 2013 was drafted harshly, certainly because it was passed in the backdrop of the Satyam scandal. He thus concurred that there was a need to decriminalize minor offences, that did not constitute fraud, and help to reduce the burden of NCLT. It was also pointed out that the Bill lowers monetary penalties for violation by start-ups, and this will encourage new businesses in India. Shiv Sena MP Arvind Sawant also supported the Bill but pointed out certain anomalies therein. He sought to know from the Government about the criteria that will be employed to de-list certain class of companies. "Who will decide which class of companies has to be excluded? What will be the criteria?" he speculated. He also asked the Government about an amendment proposed to relax provisions relating to charging of higher additional fees for default on two or more occasions in submitting, filing, registering or recording any document, fact or information as provided in section 403. Stressing on the word "More" he remarked, "What is more? What is the number? How many times will the Government forgive a defaulter? A number has to be mentioned." The Bill was however opposed by the members of the Congress party who asserted that it was an attempt to overhaul the substance of the Company Law, without holding proper consultations, only to benefit the corporates. MP Manish Tewari informed the House that it was after great deliberations that a "fine balance" was struck between cohesive action and civil action under the Company Law. However, the Government had decided to disrupt the same only to benefit the private sector. He highlighted that the Government claimed to have decriminalized offences that do not affect public interest but there was no mention about the parameters of defining such interest. Speaking on the new chapter regarding Producer Companies, he said that when the same is read with the recently passed Farmers Bills for contract farming and trade relaxations, it becomes clear that a channel is being made for companies and business to enter into farmers' business. He remarked, "It nothing but a backdoor to facilitate the entry of big corporates into the agriculture sector, to militate against the interest of small and marginal farmers. Over a period of time it will have the impact unravelling the first 15 amendments to the Indian constitution from 1950-1965. All those amendments, which were carried out to give land to landless farmers, abolish Zamindari system, assure farmer's dignity of labour and permanency over his land." On the aspect of relaxing provisions of CSR and allowing companies to roll over CSR commitment for 3 years, Tewari said that given the manner in which companies already excape their social responsibility, such flexibility in the law is erroneous and it will help the companies to further escape from their liabilities. Lastly, he spoke about relaxations granted to NBFCs and finance companies and refuted the same in the backdrop of IL&FS scandal and DHFL's payment defaults. As the House had exceeded its scheduled sitting hours for over 3 hours, Minister of Corporate Affairs, Nirmala Sitharaman kept her response very crisp. She responded to the issue of favouring only big corporates and emphasized that all the changes in the law will also benefit MSMEs. She further assured that there were 35 Serious/...

Lok Sabha Clears Bill To Decriminalize Minor Procedural Offences/ Technical Lapses Under Companies Act 2013 [Read Bill]

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Lok Sabha Clears Bill To Decriminalize Minor Procedural Offences/ Technical Lapses Under Companies Act 2013 [Read Bill]

Akshita Saxena

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INR 1099+GST

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This is a premium content
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