Lok Sabha on 26 July 2019 gave its nod to the Companies (Amendment) Bill which seeks to tighten corporate social responsibility compliance and reduce the load of cases on the National Company Law Tribunal (NCLT). Finance and corporate affairs minister Nirmala Sitharaman said the draft law will also ensure more accountability and better enforcement to strengthen the corporate governance norms.
- A bill to replace the first ordinance was passed in Lok Sabha in January 2019 but could not get through in Rajya Sabha. Hence the second ordinance was promulgated in February. This bill has been brought to replace the second ordinance.
- The Lok Sabha Speaker allowed the finance minister to introduce the bill after noting that he had already given a ruling that from the next session at least two days’ prior notice should be given to MPs before introduction of any bill.
- The bill has recategorised 16 ‘criminal’ offences under the Companies Act, including the failure to file annual returns and the issuance of shares at a discount to civil offences, allowing government officers to levy penalties instead of initiating criminal proceedings.
- The legislation also grants regional directors of the ministry the power to settle offences with a penalty of Rs 25 lakh, a five fold jump from Rs 5 lakh earlier.
- It also provides for allowing firms to transfer their unspent CSR funds to a separate account and empowers Centre to deal with violators. Besides, it seeks to enable the National Financial Reporting Authority.
- The Central Government has constituted National Company Law Tribunal (NCLT) under section 408 of the Companies Act, 2013 (18 of 2013) w.e.f. 01st June 2016.
- The National Company Law Tribunal is a quasi-judicial body in India that adjudicates issues relating to Indian companies.
- All proceedings under the Companies Act, including proceedings relating to arbitration, compromise, arrangements and reconstruction and winding up of companies shall be disposed of by the National Company Law Tribunal.
- NCLT bench is chaired by a Judicial member who is supposed to be retired/Serving High Court Judge and a Technical member who is from Indian Corporate Law Service, ICLS Cadre.
- In the first phase the Ministry of Corporate Affairs have set up eleven Benches, one Principal Bench at New Delhi and ten Benches at New Delhi, Ahmadabad, Allahabad, Bengaluru, Chandigarh, Chennai, Guahati, Hyderabad, Kolkata and Mumbai.
- These Benches will be headed by the President and 16 Judicial Members and 09 Technical Members at different locations.