Faceless adjudication of Company Law Offences - Compoundable Offence

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The Ministry is looking to adjudicate such matters without company executives having a physical interface with government officials. Besides improving ease of doing business, This initiative is expected to address the governance challenges caused by the Covid-19 pandemic, using technology.

An adjudication is a legal ruling or judgment, usually final, but it can also refer to the process of settling a legal case or claim through the court or justice system. It usually refers to the final judgment or pronouncement in a case that will determine the course of action taken regarding the issue presented.

Faceless Adjudication means adjudication remotely through electronics means.

This will minimize the physical appearances and further reduce the load on special courts/tribunals as the proceedings will be conducted through the MCA Website.

The Income Tax department has already enabled faceless or remote assessment of tax returns to eliminate any chance of inappropriate dealings between individual officers and the tax payer, who the government considers as its client.

The ministry of corporate affairs all set to take a leaf out of the Income Tax department’s book to offer faceless adjudication of specified company law offences to enable social distancing as well as eliminate bureaucratic discretion.

The MCA is in process to upgrade its online services offered through its MCA 21 protal, in order to facilitate adjudication remotely through electronic means, for breaches under the Companies Act, 2013.

Now question arise which type of offence can be adjudicated electronically? 

These are the offences that the administrative machinery of the ministry is authorised to adjudicate on, so that businesses can settle them and pay the fine or penalty where needed without having to go to a court.

The Ministry has already taken steps in decriminalizing offences in Companies Act 2013.

1. The Companies Act was amended last year to reclassify 16 offences as civil defaults and to let adjudicating officers appointed by the government to levy penalties instead of having to go to a court to decide on the matter. 

 For example - Matters related to issuance of shares at a discount and default in filing annual returns. 

2. Further Companies (Amendment) Bill 2020, which seeks to decriminalize approximately an additional 23 offences as part of an effort to make the law more ‘humane’ and to improve ease of doing business, was introduced in the Lok Sabha in, but is yet to be passed.

These offences will also come in ambit of faceless adjudication once the Bill will passed in parliament or brought to effect through an ordinance 

Further FM "Nirmala Sitaraman in her speech last week granted extra time for filling and complying with other statutory requirements  to cope up with Challenges created because of COVID 19. Below are the extracts of FM Speech:

For MCA Related Matters 

1.      For the FY 19-20 It will not be seen as a violation if independent directors cannot hold a single meeting.

2.      If there is a company director who does not comply with the minimum residency requirement (i.e. 182 days in India pursuant to Section 149 of the Companies Act, 2013) it shall not be treated as a violation

3.      For newly incorporated companies, there is a requirement to file declaration on commencement within six months. We are giving them additional six months.

4.      Applicability of The Companies Auditors’ Report Order 2020, shall be made applicable from FY 2020-21 which was supposed to have come into force in 2019-20

5.      Relaxation in holding of board meetings for a period of 60 days till the next two quarters.   

       

6.      MCA 21 Registry Moratorium issued from 1 April till 30th September

7.      The requirement 20 Deposit Reserve  of Deposit Maturing during the FY 20-21 before 30th April, 2020. This was shifted to June 2020

8.      Requirement of investing 15% of Debentures maturing during the particular year before 30th Arpil, 2020 was shifted to June 2020
   
                                                     For IBC Related Matters 

1. The threshold for default is currently Rs 1 lakh raises  to Rs 1 crore.
2. The FM said We may consider suspending Section 7, 9 and 10 of the Insolvency and Bankruptcy Code (IBC), at a later stage, if the current situation continues beyond six months.

Also Among other circulars The Ministry of Corporate Affairs (MCA) has issued Companies Fresh Start Scheme, 2020 (Scheme 2020) enabling the companies for a fresh start by removing the stain of non-compliant on the name of the company. This scheme also knowed as immunity booster for Non Complaint Company.

The Scheme 2020 can be viewed as a relief to the Companies who have committed unintentional contravention of the Companies Act, 2013 (Act 2013) or Companies Act, 1956 (Act 1956) subject to limitations under the scheme.

Source - Livemint 

ABOUT THE AUTHOR

AAKARSHIT JAI-  Company Secretary (Aspirant)

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