CII: Fear of criminal tag among companies

MUMBAI: The Confederation of Indian Industry (CII) has said that there is a fear factor among directors, young entrepreneurs and foreign investors over increasing incidents where commercial and civil disputes are being treated as criminal complaints. The industry body has petitioned the Prime Minister and the finance minister, calling for steps to decriminalise provisions in several business-facing laws and Acts to improve investor confidence.
CII’s recommendations cover 37 laws and Acts, ranging from the Partnership Act of 1932 to the Insolvency & Bankruptcy Code of 2016. It has said that offences that are technical or those that do not affect public interest prejudicially should be decriminalised. The confederation has said that there are 23 offences under the Companies Act that could be shifted to an adjudication mechanism, and seven offences where penalties can be omitted as they pertain to orders of the National Company Law Tribunal (NCLT). “The NCLT may use its contempt power in such cases,” the representation said.
During the Union Budget 2020-21 speech, finance minister Nirmala Sitharaman had emphasised that criminal liabilities for civil Acts will be amended in the Companies Act and other laws would also be examined. In this context, the CII has identified many of these Acts where criminal provisions exist.
For instance, under the Sebi Act, the maximum punishment for non-compliance is imprisonment up to 10 years, or fine of Rs 25 crore, or both. “Mere errors of non-disclosure or late disclosure, which are not significant in nature, may be made punishable with penalties that are not substantial in monetary terms or do not include the possibility of imprisonment,” the CII said. The confederation has recommended 12 alternative ways to work towards decriminalisation of laws and amend legislation to change criminal penalties to civil penalties.
“A change in the nature of penalty provisions in business and economic laws represents the next stage of reforms in ease of doing business. Divesting criminal penalties from business laws — unless well-defined criminal actions are found — will strengthen confidence among young entrepreneurs and investors in doing business,” CII president Vikram Kirloskar said.
Besides these laws, CII has highlighted sections of competition law, partnership Act, labour laws, environment laws and FMCG laws that required amendment. “Inadvertent errors or technical deviations may not be tried as criminal offences, and the director of the company not to be tried before the remote magistrate courts but by the respective controller of legal metrology where the registered office of the company is situated,” the representation said.
Earlier, the government had sought to criminalise failure to meet targets for spending toward corporate social responsibility. However, following protests from industry, the government said that it is not going ahead with the provision.