CA Sandeep Kanoi

As we all aware that Under the Prevention of Terrorism Act (POTA) there was a Harsh Provision regarding bail which says that that any person arrested for terrorism will not get bail till either the Public Prosecutor consents to the bail or the court gives a finding that the person is innocent on the face of it.

If we read Section 212(6) of the Companies Act we will realise that UPA Government has enacted POTA provision of bail in Companies Act, 2013.

This kind of draconian provisions was sought to be deleted from the statute by the Companies (Amendment) Bill 2014 which the Lok Sabha passed yesterday.

While addressing Lok Sabha Shri Arun Jaitley said that

Having removed it from there, they brought in the POTA bail provision under Section 212 (6) of the Companies Act, which says:

“Notwithstanding anything contained in the Code of Criminal Procedure… .the following offences which attract the punishment for fraud as provided in….to a person accused of those offences…no person shall be released on bail unless the prosecutor has been given notice where the prosecutor opposes it, the court is satisfied that reasonable grounds for believing that the person is not guilty of the offences.”

Verbatim, full stop for full stop, comma for comma, they incorporated the POTA provision into the bail provision of this Act. Now this language exists in the narcotics law. When we invite the rest of the world to come to India, form a company, do business and invest in India, are we trying to say that in case you commit any of these offences you will never get bail or you will indefinitely never get bail?

Relevant Extract from Unedited Speech of Minister of Corporate Affar Shri Arun Jaitley given in Lok Sabha on 17.12.2014

I would request any hon. Member, if he has a copy, to pick up section 212(6) of this Act. I am referring to an extraneous fact when in 2004 the UPA came to power, there was a law which the NDA had enacted called the Prevention of Terrorism Act (POTA).

The UPA’s main criticism of POTA was that some of the provisions are very repressive and so they repealed POTA. When they repealed the anti-terrorism law, they incorporated most of the provisions under the Unlawful Activities Prevention Act. But one provision the UPA said that they would not agree to put in the Unlawful Activities Prevention Act was regarding a harsh bail provision. The POTA said that any person arrested for terrorism will not get bail till either the Public Prosecutor consents to the bail or the court gives a finding that the person is innocent on the face of it. Now finding of innocence is not possible till the trial is held. So, the UPA’s own case was that this is not a provision we can agree with and, therefore, they removed that provision from the anti-terrorism law. Having removed it from there, they brought in the POTA bail provision under Section 212 (6) of the Companies Act, which says:

“Notwithstanding anything contained in the Code of Criminal Procedure… .the following offences which attract the punishment for fraud as provided in….to a person accused of those offences…no person shall be released on bail unless the prosecutor has been given notice where the prosecutor opposes it, the court is satisfied that reasonable grounds for believing that the person is not guilty of the offences.”

Verbatim, full stop for full stop, comma for comma, they incorporated the POTA provision into the bail provision of this Act. Now this language exists in the narcotics law. When we invite the rest of the world to come to India, form a company, do business and invest in India, are we trying to say that in case you commit any of these offences you will never get bail or you will indefinitely never get bail? Therefore, most companies said that it is safer for them to switch over to a limited liability partnership than continue to do business.

Now, if you look at the other provisions of the Act, all offences under grievous laws relating to terrorism, narcotics, sedition, prevention of corruption etc., they say that ordinary courts will not try these cases and there will be special courts. So, all offences against a company will go to a Special Court. The ordinary Magistrate’s jurisdiction is taken away. Are we trying to induce investors to come and invest in India or are we trying to scare them away from the country? We have, therefore, brought in an amendment that extremely harsh offences will be before a Special Court and the rest will be before the normal courts of the land. If a man wants to wind up a company, there has to be a provision in law. The case relating to winding up these days normally goes to a single judge of the High Court as one judge in every High Court is a company law judge. If somebody says that there is a commercial insolvency or any other reasoning or the company itself wants to be wound up, it goes to a single judge, there is a procedure to be followed and it gets wound up.

This Bill says that simple company matters and other matters go to a single judge, appeals go to a Division Bench and some extraordinary matters also go to a Division Bench. A company to be wound up has to go to a full Bench of three judges. What is the rationale? That is why I said either some of the provisions are oppressive or some of the provisions like having one judge or two judges or three judges could have even come by an oversight.

Now, let me give you another oversight provision. There are offences companies commit. If there is a company which does not follow the procedure and starts collecting deposits, it is a punishable offence. In the Act, we forgot to make it an offence.

So it is the case of an oversight. If I run through each of these 14, the first two, requirement of capital and seal, the international standard practice now in corporate laws across the world is that you have done away with these requirements. So, here it has been brought at parity with international laws.

The next provision, section 76 says, we forgot to provide for an offence where somebody collects deposits in violation of law. We did not make it an offence under the Companies Act; so it has been made an offence.

Compiled by CA Sandeep Kanoi

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Category : Company Law (3466)
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Tags : Companies Act (1934) Companies Act 2013 (1706)

0 responses to “Jaitley Removes Provision of No Bail for offences Under Companies Act, 2013”

  1. MRK Gandhi says:

    I feel our Finance Minister playing hot and cold. Earlier in the name of liberalization we have melted down jail for economic offenses. Now melting down the offenses our Companies Act. Just because we invite foreign investors they are allowed to commit offenses. Can’t they do business within our legal frame. Unfortunate that our Finance Minister being aware how the business class duped our investors and public were siphoned off; besides cheating our banks trying to help corporate fraudsters. Probably his association with corporates prompts him to take such unhealthy decisions. He is not entitled to amend laws to help corporate fraudsters. It is a sad day.

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