The Hindu Business Line : RoCs may be empowered with penal powers: Gupta

The Government would come out with a Company Law Simplified Settlement Scheme and also look at striking off names of defunct companies in order to clear the backlog of court cases related to technical and other minor violations.

New Delhi , Oct. 22

THE Ministry of Company Affairs is looking at empowering its field officers, the Registrar of Companies (RoCs), with penal powers.

"The penal provisions are set to undergo complete change under the new Company Law. The Ministry is examining the prospects of authorising the RoCs to levy penalties on companies that have not complied with the law," the Minister of State (Independent Charge) Company Affairs, Mr Prem Chand Gupta, said.

While accepting the report of the Expert Group, headed by Mr O.P. Vaish, on `Streamlining the prosecution mechanism under the Companies Act', the Minister said there was a need to build an in-house prosecution mechanism. Currently, all offences under the Companies Act are prosecuted in trail courts as criminal offences.

The Minister indicated that in line with the suggestion of the Expert Group, the Government would come out with a Company Law Simplified Settlement Scheme (CLSSS) and also look at striking off names of defunct companies in order to clear the backlog of court cases related to technical and other minor violations.

In the absence of an in-house mechanism, there were approximately 45,000 cases pending in various courts and about 2,000 cases were added to the list every year. The average period of disposal of such cases takes about five years and the average amount of fine imposed per case comes to Rs 2,247, the Minister said.

The Expert Group has classified cases into five categories. Under category-A will fall compoundable cases in which there has been no service of summons till date. There are 16,724 prosecution cases pending in this category. As per the report, such cases should be withdrawn and thereafter the names of such companies should be struck off in accordance with the prescribed procedure under the company law.

Those compoundable cases in which summons have been served and cases are in progress fall under category-B. There are 7,146 prosecution cases pending in this category.

The report has suggested that cases under this category may be allowed to take advantage of the proposed CLSSS-2005.

Category-C is for those compoundable cases that have been filed on or after January 1, 2003. There are 12,030 prosecution cases pending in this category. The report suggests that cases falling in this category may be summarised as under: where summons have been served, the concerned defaulters can avail of the proposed CLSSS-2005; where summons have not been served, the cases may be actively pursued in Courts.

Under category-D will fall those compoundable cases that related to NBFCs, chit funds companies, plantation companies, serious fraud investigation cases, vanishing companies, listed companies, cases involving securities scams and other cases of similar nature which involve public interest.

There were 5,107 prosecution cases pending in this category. The report has recommended that these cases should neither be withdrawn nor allowed to take the benefit of the proposed CLSSS-2005.

Non-compoundable cases in which prescribed punishment under the Companies Act is imprisonment, with or without fine, fall in the final category. As per available statistics, there are 1,072 prosecution cases pending in this category.

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