In a bid to check the rise in court cases against corporate houses for company law violations, the government is set to give more powers to its officials to deal with such offenses out of court. The framework proposed in the new company law envisages that company disputes should not be dragged to the court.

Presently, the registrar of companies (RoC) moves court against the company whenever it Notices a company law violation and the subsequent litigation stretches too many years even if the Offense is minor and technical in nature. Soon, RoC and regional directors would be allowed to settle such cases by levying a penalty. The penalty would not be high for minor offenses such as not filing statutory documents on time.

The move is expected to help in reducing litigation involving government and companies which are on the rise in line with a fast-expanding economy. The proposal is part of the companies Bill, 2008, which has recently been cleared by the Cabinet and is expected to be tabled in Parliament soon.

Now, once a case is filed against a company, the government is not at liberty to withdraw the ase, which Dr. Duvuri Subbarao has is purely at the discretion of the court. In the absence of been appointed as the next flexibility for officials to deal with offenses without going Governor of eserve Bank to court, 40,000 cases are pending against companies in of India. He will take various ourts, some of which are 25 years old, corporate charge of the new post affairs minister Prem Chand Gupta told ET. after the present RBI Governor; Dr. Y.V. Reddy “Now, legal expenses of both the parties extend to several demits his office on 5th of lakhs of rupees, and at the end of protracted litigation, the this month. average realisation of fine is only Rs 2,200,” Mr Gupta said, explaining the need to address the issue in the new company law. The government is also planning to set up exclusive courts to deal with company law offenses.

It is believed the new set up will go a long way in reducing the burden of litigation at all levels, extending up to the Supreme Court. Several corporate matters reach up to the apex court, being seen as a result of an ineffective in-house grievance redressal mechanism. The proposal is in line with an expert committee report chaired by senior advocate O P Vaish. The report had called for empowering RoC which acts as the first line of interface with the government.

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January 2021