Offences, Prosecution And Penalties Under The Companies Bill 2008
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1. Introduction:The Statement of Objects & Reasons appended to the Bill,inter alia, declares that: Maximum and minimum quantum of penalties for each offence hasbeen laid down with a suitable deterrence for repeateddefaults; Company is identified as a separate entity for imposition ofpenalties apart from the officers in default; In case of fraudulent activities, provision for recovery anddisgorgement have been provided; Levy of additional fee in a non-discretionary manner forprocedural non compliance, such as late filing of statutorydocuments will be provided through Rules to be prescribed. Defaultsof procedural nature will be penalised by levy of monetarypenalties by the adjudicating officers not below the level ofRegistrar. The appeal against the orders of adjudicating officerswill lie with suitably designated authorities; Special courts will deal with offences under the Bill. The above declaration sums up the approach of the Central Govtin dealing with the offences under the Bill and the authorities whowill be handling these offences. This is refreshingly a drasticdeparture from the existing practice under the company law. This isalso a recognition of the fact that the existing system is not allthat effective and it needs to be revamped in the context ofchanging economic scenario and the business environment in ourcountry. 2. A few Highlights: Corporate Offences are broadly classified as civil and criminaloffences. The offences committed by the directors and officers of acorporate body, which is criminal in nature, also fastens on thecorporate body, being an independent legal entity, in the samemanner and to the same extent as the perpetrators of the offence.This brings us into sharp focus the fundamental legal relationshipbetween the corporate body and those making use of corporate namefor doing business. The offences under the Bill are broadlyclassified as falling under the following categories: The concept of "Officer who is in Default" presentlydealt with in Section 5 of the Companies Act, 1956 (the Act) hasbeen shifted to the definition clause" in the Bill withenlargement of the scope of application. More of this provision hasbeen discussed subsequently. A quick reckoning reveals that thewords "Officer who is in Default" appears in about 32Clauses in the Bill. Some of the provisions which fall under thiscategory are (i) failure to comply with the direction of theCentral Govt to rectify name of the company (Clause 15), (ii)allotment of securities by a company (clause 34(6), (iii) listingof securities, failure thereof (Clause 35) (iv) variation ofshareholder‟s rights (Clause 42)(v) application ofpremiums received on issue of shares (Clause 46) (vi) transfer andtransmission of shares (Clause 50), (vii) rectification of registerof members (Clause 53), notice to be given to the Registrarregarding alteration of capital (Clause 57), (viii) restriction onpurchase of its own shares and giving of loans by it for purchaseof its shares subject to certain exemptions (Clause 60), (ix)failure to make repayment of deposits(Clause 67). In regard tothese matters the whole time director, other key managerialpersonnel which includes the Managing Director, the Chief ExecutiveOfficer or the Manager, the Company Secretary, the Chief FinancialOfficer and a few other categories of persons are included. Thesecategories...
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