Decriminalisation Of Company Law And Other U-Turns

Critics might say that in India, the problems of weak enforcement and a clogged judicial infrastructure render most punishment pointless. That dismal point aside, recent recommendations to lighten the punishment provided in many sections of the company law — for violations ranging from late filing to audit fraud — have been met with mixed responses. The proposal to replace punishment by imprisonment with punishment by penalty is welcome due to how long the criminal trial process takes. But there are concerns whether monetary penalties serve as deterrent enough or over time become the ‘cost of doing business’. Also, a more general and important concern is the numerous changes to company law in the five years since it was enacted.The CommitteeTo go back to the beginning — a second such committee in as many years has recommended the further decriminalisation of the Companies Act, 2013.In August 2018, the first committee proposed recategorisation of 16 compoundable offences into civil defaults. These were accepted and effected via an amendment to the Companies Act.This new committee, constituted in September 2019 and like the old one a mix of bureaucrats and private sector experts, has recommended to rationalise penalties in 46 more criminal compoundable offences to civil liabilities.This will undoubtedly help ease of doing business, said noted senior advocate Amit Desai in a discussion on BloombergQuint. He cited several such efforts in the past. In 1992, the Imports And Exports (Control) Act, 1947 was repealed and in its place came the Foreign Trade (Development and Regulation) Act. “It was actually the first attempt in the realm of business law to decriminalise the process. It took away all criminal offences and left it with only civil law implications,” Desai said. He also pointed to the repeal of the Foreign Exchange Regulation Act, 1973 (FERA) and its replacement by the Foreign Exchange Management Act, 1999 (FEMA).Like most experts, Desai noted, that while decriminalisation in itself is not objectionable, the question is one of balance. Especially in the main law that governs companies.

Decriminalisation Of Company Law And Other U-Turns

Decriminalisation maybe necessary but can meager monetary penalties be deterrent enough?

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