Life to get less taxing for minor violations of Cos Act

NEW DELHI: The government is finalising rules to make life simpler for minor violations of the Companies Act through time-bound adjudication, along with steps to reduce possible harassment of executives.

The move comes weeks after amendments to the Companies Act, where the government has sought to shift to in-house disposal for minor offences, instead of leaving it to courts and clogging the judicial system.

The new adjudication of penalty rules, expected to be released by the ministry of corporate affairs over the next few days, will prescribe a 60-day time limit for adjudication of cases, with the appeal to be disposed off in 90 days, sources told TOI. The move is meant to ensure that cases do not drag on endlessly.

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Similarly, the government is moving to a digital mode of adjudication where notices will be served electronically, with responses to be furnished online. “Physical presence of executives will be an exception and the official seeking it will have to record the reason. The reason will also have to be assigned in the order by the officer,” said a source.

The steps have been drawn up based on the experience of the income tax department, which has moved to an electronic method of issuing notices and getting responses to reduce face-to-face interaction with taxpayers. At the same time, the department has ensured that only specific issues are raised in the notices.

In case of Companies Act violations, the government is also going to use the mobile number and the e-mail IDs submitted by directors under the recently concluded KYC process and an electronic notice will be deemed to have been delivered and read if it does not bounce back.

The government will also specify that the penalty imposed for the offences will not be lower than the minimum level prescribed in the law. In the past, it was noticed that officers would levy penalties that were not in line with the law. For instance, if the law mandated a Rs 50,000 daily penalty for an offence, there have been instances, where the registrar of companies actually imposed a fine of Rs 5,000 or Rs 15,000 a day, said a source.

The government promulgated an Ordinance to amend the Companies Act, which re-categorises compoundable offences to an in-house adjudication framework, although no change has been made in case of those that are deemed to be serious. It has also prescribed stiffer penalties for repeated defaults.

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