Corporate affairs secretary Injeti Srinivas (PTI file)
Corporate affairs secretary Injeti Srinivas (PTI file)

Government to rationalise penalty for company law breach

  • A panel led by corporate affairs secretary Injeti Srinivas, will recommend these offences to be classified as civil wrongs not warranting jail term
  • It will also propose a liberal penalty regime for small businesses

New Delhi: The government is set to decriminalise over 40 violations under the Companies Act, and rationalise penalty provisions to make the regulatory regime more investment friendly and less adversarial.

A panel of experts, appointed by the Ministry of Corporate Affairs, met here recently to discuss the proposals that are likely to form the basis for an amendment to the law in the winter session of Parliament, said a person privy to the discussions.

The panel, led by corporate affairs secretary Injeti Srinivas, will recommend these offences to be classified as civil wrongs not warranting jail term and will propose ways to improve compliance. It will also propose a liberal penalty regime for small businesses, said the person, who spoke on condition of anonymity.

The move is part of a revamp of the regulatory architecture to make it easier to do business in India and reduce litigation. Also, tough penalties make it harder for the authorities to secure conviction against the offender in courts.

Mint had reported on 18 September that the panel will explore the feasibility of bringing new schemes such as settlement mechanism and deferred prosecution agreement — a kind of amnesty subject to the defendant meeting certain conditions, within the ambit of the company law.

“The panel is of the nature of a standing committee, which will continue to recommend measures as long as the government wants," said the person quoted above. Initially, it has a term of one year. The government had amended the Companies Act earlier this year to liberalise the penalty for procedural and minor offences. It also changed the rules to make access to capital easier and cheaper for businesses. Recently, in the case of income tax disputes, the government sharply raised the monetary ceiling for appeals in tribunals, high courts and the Supreme Court so that businesses are not distracted from their operations by disputes over small amounts.

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