Over the years, corporates, officers and investors have expressed serious concern about the stringent penal provisions for certain matters of minor nature.
Some times, these offences are not grave in nature and penal provisions seem to be disproportionate – these concerned quarters have been urging the central government to have a relook into the prevailing systems and provisions and decriminalize of comparatively less severe offences.
Last year, the Indian central government had de-criminalized certain offences of civil nature under the Companies Act, 2013 to provide much needed relief to the corporate fraternity.
Now, the central government seems to be gearing up for another round of de-criminalization of offences – this time under different corporate enactments.
The underlying intent is to ease the compliance pressure on the companies which are already facing the economic wrath created by the Covid19 virus.
Department of Economic Affairs (DEA) proposes to de-criminalize and rationalize certain minor offences under the ambit of SEBI regulations (i.e the Securities and Exchange Board of India Act, 1992, the Securities Contract Regulation, Act, 1956, and the Depositories Act, 1996).
DEA has invited comments from all the stakeholders by June 27, 2020 and will decide the set of minor offences to be de-criminalized following the receipt of comments from the stakeholders and review thereof.
Such stakeholders include industry experts, officials from public and private sector organizations, state governments, Union Territory administrations, civil society, academicians, and others members.
The next wave of de-criminalization of minor offences would be in line with the de-criminalization of civil offences under the Companies Act, 2013.
DEA efforts are the reflection of the central government’s announcement made in May, 2020 with specific emphasis on de-criminalization of minor, technical and procedural defaults as part of the central government stimulus package.
For example, the list of offences under consideration for de-criminalization could include:
Currently, punishment for non-compliance with SEBI orders and non-payment of penalty within mandated timelines shall be imprisonment ranging from one month to up to ten years and fine to a tune of INR 25 crore.
De-criminalization of minor offences will be an instrumental measure in rationalizing the corporate governance structure and to improvise good governing practices.
Certain offences under 37 different enactments (i.e Partnership Act of 1932, Insolvency and Bankruptcy Code, Labour laws, Consumer Protection laws, environment laws etc.,) are identified as part of de-criminalization program.
The stakeholders feel positive about the de-criminalization of certain technical and minor offences and are of the opinion that it will certainly benefit the corporate fraternity to a great deal and simplify the compliance process for the corporate firms.
The major anticipated benefits of de-criminalization of minor offences could be:
However, the central government has to be vigilant and to ensure the de-criminalization of offences is not used to get away with a simple penalty from commission of defaults of grievous nature or vitiate the compliance culture in the country.
Bhumesh is the Managing Partner of Corp Comm Legal, an Indian law firm. He is ranked among the Top 100 Indian corporate lawyers. He is advising domestic and foreign companies on M&A, joint ventures, corporate - commercial issues. Besides, he has written a book on Drafting of Commercial Agreements, has a couple of books in pipeline and trains students and professionals on Drafting Skills and corporate laws. He writes regularly on legal, business & other issues and is a guest faculty lecturer with educational institutes. Bhumesh holds a Bachelor of Laws (LLB) from the University of Delhi and a further qualification in International Law and Legal Studies from College of Law, York.