Regulations
Non-bailable offences under the new Companies Act

The new Companies Act has several provisions for non-bailable offences. What should you know when you get arrested? What are your rights ? And what are the implications of non-bailable offences?

The Companies Act, 2013 (the Act) has brought in extensive changes with the objective to ensure and seek transparency and establish better corporate governance practices. The Act has gone a step further to treat certain offences at par with criminal ones, thereby identifying them as cognizable and non-bailable. It becomes imperative on the part of promoters, directors, officers or any other person of the company to know what offences classified, as non-bailable, mean, what does non-bailable mean and what are the rights under such circumstances.

 

An offence denotes “crime” or “wrongdoing.”  Section 2(n) of the Criminal Procedure Code (Code) defines offence as “any act or omission made punishable by any law for the time being in force”. Section 40 of Indian Penal Code (IPC) defines offence “to denote a thing made punishable under the Code”. An act becomes an offence only when specifically made punishable by any law. An act, which has not been made punishable expressly under any law, is not an offence.

 

Bail has not been defined in the CrPC. Section 205 (Indian Penal Code, 1880) of IPC defines bail as temporary release from imprisonment on furnishing security/surety to appear for trial. It means release of an accused/offender from legal custody upon their giving sufficient security for his appearance later. Law recognises that individual freedom should be safeguarded and that every person including the accused is entitled to freedom unless found guilty.

 

Bailable and non-bailable offences

 

The Code does not provide any specific criteria to determine whether a particular offence is bailable or non-bailable. It is only the First Schedule of the Code that illustrates whether an offence falls under the bailable or non-bailable category. However, generally speaking, it can be stated that by and large serious offences are considered as non-bailable and others as bailable.

 

As per section 2(a) of the Code a "bailable offence" is an offence (i) which is shown as bailable in the First Schedule of the Code, or (ii) which is made bailable by any other law for the time being in force. These primarily constitute less serious offences, where bail can be claimed as matter of right and is granted by police officer in due course. Any other offence apart from those mentioned as bailable is “non-bailable.”

 

On perusal of the First Schedule of the Code, offences that are punishable with imprisonment of less than three years are usually considered as bailable and offences that are punishable with imprisonment for three years or more are usually considered as non-bailable.

 

Under non-bailable offences, bail cannot be claimed as a matter of right. This, however, does not mean that there can be no bail for such offences. It simply means that grant of bail for such offences are purely at the discretion of the court. The court after recording reasons, may release an accused on bail. However, persons accused of offences punishable with death, life imprisonment or imprisonment for seven years or more can be released on bail, only after giving an opportunity of hearing to the public prosecutor.

 

Non-bailable offences under Companies Act, 2013

 

Section 212(6) of the Act now recognizes offences as mentioned in the Annexure (at the end of this piece) to be cognizable (S.2 (c) of Code of Criminal Procedure, 1973), offence where a police officer may arrest without a warrant, and non-bailable.

 

This means that a bail for such offences can be granted only:

  1. after the public prosecutor has been given an opportunity to oppose the same; and
  2. the court has sufficient reason to believe that the person is not guilty of offence and shall not likely commit any offence when on bail.

This section, however, is not applicable to:

  1. a person under the age of 16 years ; or
  2. a woman ;or
  3.  the sick; or
  4. an infirm person, who otherwise may be released on bail subject to discretion of the court.

Imposing such a condition on bail, technically equates these offences with offences that are punishable with death, life imprisonment or imprisonment for seven years or more, where bail may be granted subject to hearing of the public prosecutor and court.

 

The very intention to recognise offences under section 212(6) as a “criminal” is to acknowledge it as a public wrong and prevent and control further occurrences of the same. Recognising such offences as non-bailable would not only deter the offender from committing further offence but also deter others from committing similar offences thereby upholding the very objective and intrinsic principle of criminal justice.

 

Know your rights when under arrest

 

The Code provides and confers certain specific rights to persons who are arrested as below:

  1. right to know grounds of arrest (as guaranteed by Article 22 of Constitution of India);
  2. right of bail;
  3. right to be produced before magistrate or court;
  4. right to inform relative/ friend;
  5. right to consult lawyer;
  6. right to be examined by doctor.

The Act, in the wake of various reported frauds and fraudulent activities on part of the officers in charge of the company, has substantially enhanced the severity of punishment for such offences. It has made efforts to recognise them as criminal and non-bailable with an objective to prevent and control such offences, safeguard the interests of the shareholders and also to serve as deterrent for those pronounced guilty.

 

However, time alone shall judge whether such severity was able to satisfy and make substantial difference in upholding the principles of justice, equity and fairness.

 

Annexure: Non-bailable offences under the Act

 

Section

Offence

Person liable

7(5)

Furnishing any false or incorrect particulars of any information or suppressing any material information, with the Registrar in relation to the registration of a company

A person furnishing such information

7(6)

Furnishing any false or incorrect information or representation or by suppressing any material fact or information in any of the documents or declaration filed or made during incorporation of company, or by any fraudulent action

Promoters, first directors of the company and/or an advocate, a chartered accountant, cost accountant or company secretary in practice, engaged in the formation of the company and a person named in the articles as a director, manager or secretary of the company.

 

34

Untrue or misleading statements stated in prospectus or where any inclusion or omission of any matter is likely to mislead

Every person who authorizes the issue of such prospectus

36

Knowingly or recklessly making any statement, promise or forecast which is false, deceptive or misleading, or deliberately conceals any material facts, to induce another person to enter into, or to offer to enter into any agreement (i) with a view to, acquiring, disposing of, subscribing for, or underwriting securities; or (ii) the purpose or the pretended purpose of which is to secure a profit to any of the parties from the yield of securities or by reference to fluctuations in the value of securities; or (iii) with a view to obtain credit facilities from any bank or financial institution

Any person making such promise

38(1)

Abetments (i) of an application in a fictitious name to a company for acquiring, or subscribing for, its securities; or (ii) of multiple applications to a company in different names or in different combinations of his name or surname for acquiring or subscribing for its securities; or (iii) inducing directly or indirectly a company to allot, or register any transfer of, securities to him, or to any other person in a fictitious name

Any person making such abetments

46(5)

Issue of duplicate share certificates with the intention to defraud

Company and every defaulting officer of the company

56(7)

Transfer of shares with an intention to defraud

Depository or depository participant

66(10)

Knowingly (i) conceals the name of any creditor entitled to object to the reduction;(ii) misrepresents the nature or amount of the debt or claim of any creditor; (iii) abets or is privy to any such concealment or misrepresentation

A person who knowingly commits the same

140(5)

Auditor against whom order passed by Tribunal confirms acting in a fraudulent manner or abetting or colluding in any fraud by, or in relation to the company

Auditor of the company

206(4)

Business of a company being carried on for a fraudulent or unlawful purpose or not in compliance with the provisions of the Act or if the grievances of investors are not being addressed

Every officer of the company in default

213

(i) The business of the company is being conducted with intent to defraud its creditors, members or any other persons or otherwise for a fraudulent or unlawful purpose, or that the company was formed for any fraudulent or unlawful purpose; or (ii) any person concerned in the formation of the company or the management of its affairs have in connection therewith been guilty of fraud

 

Every officer of the company who is in default and the person or persons concerned in the formation of the company or the management of its affairs

 

229

Any (i) destruction, mutilation or falsification, or concealment or tampering or unauthorized removal of documents relating to the property, assets or affairs of the company or the body corporate, (ii) false entry in any document concerning the company or body corporate; or (iii) explanation which is false or which is known to be false; during the course of any inspection, inquiry or investigation

Any person or an officer or other employee of a company or other body corporate required to make statement under investigation

 

251(l)

Application by a company under section 248 (2) with an intention of evading the liabilities of the company or with the intention to deceive the creditors or to defraud any other person

 

Persons in charge of the management of the company

 

339(5)

During winding up of a company, it appears that any business of the company has been carried on with intent to defraud creditors of the company or any other persons or for any fraudulent purpose

Any person, who is or has been a director, manager, or officer of the company or any person who knowingly was party to the carrying on of the business in a fraudulent manner

 

448

Any return, report, certificate, financial statement, prospectus, statement or other document required by, or for, the purposes of any of the provisions of this Act or the rules made there under (i) which is false in any material particulars, knowing it to be false; or (ii) which omits any material fact, knowing it to be material

Any person making/providing such statement.

 

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COMMENTS

pawan agrawal

3 years ago

there is so many law in india , but no implementation

Are public authorities following suo motu disclosure norms under Section 4 of RTI Act?

In order to reduce the number of individual RTI applications, Department of Personnel & Training-DoPT, has issued fresh guidelines to public authorities to suo motu publish all information as required under Section 4 of the RTI Act, based on a taskforce report. But does any public authority care?

Four months after the Department of Personnel & Training (DoPT) issued fresh guidelines to public authorities to abide by the suo motu disclosure under the Right to Information (RTI) Act, the implementation seems questionable going by the general indifference of Public Information Officers (PIOs). This would have strengthened compliance with provisions for proactive disclosure as given in Section 4 of the RTI Act.

 

The government had appointed a Task Force comprising leading RTI activists of the Civil Society in 2011. Based on the report, the DoPT has directed all public authorities to strictly abide by the norms. The office memorandum to all public authorities states, “…The purpose of suo motu disclosures under Section 4 is to place large amount of information in public domain on a proactive basis to make the functioning of the Public Authorities more transparent and also to reduce the need for filing individual RTI applications.”

 

Citing that the “quality and quantity of proactive disclosure is not up to the desired level, it was felt that the weak implementation of the Section 4 of the RTI Act is partly because certain provisions of this Section have not been fully detailed and, in case of certain other provisions, there is need for laying down detailed guidelines. Further there is need to set up a compliance mechanism to ensure that requirements under section 4 of the RTI Act are met.”

 

The guidelines issued by DoPT on 15 April 2013 include posting of information on websites too. Interestingly, all government departments have to mandatorily include a chapter on RTI Act compliance. The memo states, “Government has issued directions to all Ministries/ Departments to include a chapter on RTI Act in their Annual Reports submitted to the Parliament. Details about compliance with proactive disclosure guidelines should mandatorily be included in the relevant chapter in Annual Report of Ministry/Department.’’

 

Every public authority has been asked to do an audit report and the respective ministry has been asked to monitor it.

 

Following are the rules that should have been implemented by all public authorities:

 

Procurement made by Public Authorities:

publication of notice/tender enquiries, corrigenda thereon, and details of bid awards detailing the name of the supplier of goods/services being procured or the works contracts entered or any such combination of these and the rate and total amount at which such procurement or works contract is to be done should be disclosed.

 

Public Private Partnerships

If Public services are proposed to be provided through a public-private-partnership (PPP), all information relating to the PPPs must be disclosed in the public domain by the Public Authority entering into the PPP contract/concession agreement. This may include details of the special purpose vehicle (SPV), if any set up, detailed project reports, concession agreements, operation and maintenance manuals and other documents generated as part of the implementation of the PPP project. Further, information about fees, tolls, or other kinds of revenue that may be collected under authorization from the Government, information in respect of outputs and outcomes, process of selection of the private sector party may also be proactively disclosed. All payments made under the PPP project may also be disclosed in a periodic manner along with the purpose of making such payment.

 

Transfer Policy and Transfer Orders

Transfer policy for different grades/cadres of employees serving in Public Authority should be proactively disclosed. All transfer orders should be publicized through the website or in any other manner listed in Section 4(4) of the Act. These guidelines would not be applicable in cases of transfers made keeping in view sovereignty, integrity, security, strategic, scientific or economic interests of the State and the exemptions covered under Section 8 of the Act. These instructions would not apply to security and intelligence organizations under the second schedule of the RTI Act.

 

RTI Applications

All Public Authorities shall proactively disclose RTI applications and appeals received and their responses, on the websites maintained by Public Authorities with search facility based on key words. RTI applications and appeals received and their responses relating to the personal information of an individual may not be disclosed, as they do not serve any public interest.

 

Citizens Charter

As part of the Result Framework Document of the department/organization should be proactively disclosed and six monthly report on the performance against the benchmarks set in Citizens Charter should also be displayed on the website of public authorities.

 

Discretionary and Non-discretionary grants

All discretionary /non-discretionary grants/ allocations to state governments/ NGOs/Other institutions by Ministry/Department should be placed on the website of the Ministry/ Department concerned. Annual Accounts of all legal entities who are provided grants by Public Authorities should be made available through publication, directly or indirectly on the Public Authority’s website.

         

Foreign Tours of PM/Ministers

A large number of RTI queries are being filed on official tours undertaken by Ministers or officials of various Government Ministries/Departments. Information regarding the nature, place and period of foreign and domestic tours of Prime Minister are already disclosed on the PMO’s website. As per DoPT’s OM No. 1/8/2012-IR dated 11/9/2012, Public Authorities may proactively disclose the details of foreign and domestic official tours undertaken by the Minister(s) and officials of the rank of Joint Secretary to the Government of India and above and Heads of Departments, since 1st January, 2012. The disclosures may be updated once every quarter.

Information to be disclosed proactively may contain nature of the official tour, places visited, the period, number of people included in the official delegation and total cost of such travel undertaken

 

Guidelines for digital publication of proactive disclosure under Section 4

Section 4 lays down that information should be provided through many mediums depending upon the level of the public authority and the recipient of information (for example, in case of Panchayat, wall painting may be more effective means of dissemination of information), and that more and more proactive disclosure would gradually be made through Internet. There is need for more clear guidelines for web-based publication of information for disclosure

It should be the endeavour of all public authorities that all entitlements to citizens and all transactions between the citizen and government are gradually made available through computer based interface. The ‘Electronic Delivery of Services Bill, 2012’under formulation in Government of India would provide the necessary impetus.

Websites should contain detailed information from the point of origin to the point of delivery of entitlements/services provided by the Public Authorities to citizens

Orders of the public authority should be uploaded on the website immediately after they have been issued

Website should contain all the relevant Acts, Rules, forms and other documents which are normally accessed by citizens

Each Ministry/Public Authority shall ensure that these guidelines are fully operationalized within a period of 6 months from the date of their issue

Proactive disclosure as per these guidelines would require collating a large quantum of information and digitizing it. Ministries/Public Authorities may engage consultants or outsource such work to expeditiously comply with these guidelines. For this purpose, the plan/non-plan funds of that department may be utilized

Each Ministry/ Public Authority should get its proactive disclosure package audited by third party every year. The audit should cover compliance with the proactive disclosure guidelines as well as adequacy of the items included in the package. The audit should examine whether there are any other types of information which could be proactively disclosed. Such audit should be done annually and should be communicated to the Central Information Commission annually through publication on their own websites. All Public Authorities should proactively disclose the names of the third party auditors on their website

For carrying out third party audit through outside consultants also, ministries/Public Authorities should utilize their plan/non-plan funds. The Central Information Commission should examine the third-party audit reports for each Ministry/Public Authority and offer advice/recommendations to the concerned Ministries/ Public Authorities.

Central Information Commission should carry out sample audit of few of the Ministries/ Public Authorities each year with regard to adequacy of items included as well as compliance of the Ministry/Public Authority with these guidelines.

 

For more details, visit: www.cic.gov.in

 

(Vinita Deshmukh is the consulting editor of Moneylife, an RTI activist and convener of the Pune Metro Jagruti Abhiyaan. She is the recipient of prestigious awards like the Statesman Award for Rural Reporting which she won twice in 1998 and 2005 and the Chameli Devi Jain award for outstanding media person for her investigation series on Dow Chemicals. She co-authored the book “To The Last Bullet - The Inspiring Story of A Braveheart - Ashok Kamte” with Vinita Kamte and is the author of “The Mighty Fall”)

User

COMMENTS

Deepak Gupta

3 years ago

I have query-

Is there a way senior officials of these bodies/authorities be prosecuted (via PILs) for negligence in fulfilling their lawful obligations?

The prosecution itself needs not be under RTI laws - it just provides the obligations on the public authority in this case. As long as there is no specific exemption for nonfulfilment of obligations under section 4.

Mahesh Khanna

3 years ago

Instead it is become fashion of CPIO's to simply say that information is not available or take shelter Under sec 8 (1)(e)(j) and refuse to provide information.

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