Prosecutions under Companies Act to dip

Accordingly, prosecution proceedings pending for two years or more for defaults that could lead to removal of a company’s name from records will be withdrawn. Also, prosecution proceedings pending for at least five years other than those arising from inquiries, inspections and investigations where notices remain unserved and offences involved are compoundable will get benefit of the government’s move.

Prosecution is also likely to be withdrawn in cases pending for more than two years and are barred because of the period of limitation, and where delays have not been condoned by courts. The code of criminal procedure prescribes different periods of limitation in taking cognizance of cases depending on the gravity of a case.

“We are examining a plan to withdraw prosecution in long pending cases. Continuing with them is a burden on the exchequer. However, these do not include any serious breaches, and withdrawing prosecution proceedings will improve efficiency in the system. The decision to withdraw prosecution will be taken on a case-to-case basis after careful examination,” said a second person aware about the development. The list is being drawn up, he added.

An email query to the corporate affairs ministry spokesperson on Friday were not answered at the time of publishing.

The benefit of withdrawal of prosecution will not be available for certain types of companies, including listed entities. Companies facing fraud charges will also not be eligible for withdrawal of prosecution. Companies under the description of vanishing companies—those that do not file returns, or maintain a registered office at the declared address, and whose directors cannot be traced—are not eligible for such relief.

In the case of companies defaulting on their annual return filing obligations, after withdrawal of prosecution, the authorities will go ahead and remove their names from official records.

The move is part of the Centre’s drive to improve ease of doing business and ease of life, for which de-criminalization of laws, steps to reduce litigation and rationalizing penalties have been undertaken. The government has already decriminalized more than 60 penal provisions in the Companies Act following two rounds of legislative amendments in 2018 and in 2020. The department for promotion of industry and internal trade is working on another bill to decriminalize business laws to reduce the compliance burden on enterprises.

In September, finance and corporate affairs minister Nirmala Sitharaman had asked tax officers to clear long pending petitions for grievance redressal quickly.