Why in news?
The Ministry of Corporate Affairs (MCA) has constituted a committee to review the Companies Act, 2013.
What is the Companies Act?
- The Companies Act, 2013 entailed the first massive overhaul of India’s legal regime to govern businesses.
- The Act consolidates and amends the law relating to companies.
- The 2013 Act imposes stiff penalties and, in some cases, prison terms as well, for directors and key management personnel.
What are the mandates of the committee?
- The committee is mandated to review the overly harsh provisions of the Companies Act.
- It has been tasked with checking if certain offences under the Act can be ‘de-criminalised’.
- It will review if any of the violations that can attract imprisonment may instead be punished with monetary fines.
- It will review the provisions relating to non-compoundable offences which are grave and criminal in nature.
- Also, it will recommend if any such provisions need to be re-categorised as compoundable offence.
- It is also mandated to lay down the framework of an in-house adjudicatory mechanism.
- This will allow penalties to be levied for minor violations, in an automated manner, with minimal discretion available to officials.
What is the rationale?
- The high-pitched anti-corruption discourse of the time led to harsh penalties and prison terms in the 2013 law.
- Several cases of crony capitalism, massive corporate frauds have tainted the credibility of corporate India’s standards.
- But the harsh provisions have had an impact on investor sentiment and the ease of doing business.
- Hence a review of the Companies Act is seen as a means to address the above concerns and revive the economy.
- The changes in the regulatory regime are expected to allow trial courts to rationalise their time.
- Courts could pay more attention to serious offences rather than get overloaded with cases of minor violations.
Source: Live Law, The Hindu
