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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

5 years ago

there is so many law in india , but no implementation

RBI tightens norms for NBFC loans against gold jewellery

While prohibiting NBFCs from issuing misleading, the central bank asked them to value gold jewellery accepted as collateral at the average of closing price of 22-carat gold in past 30 days

Seeking to keep the demand for gold under check, the Reserve Bank of India (RBI) has tightened the norms for loans against gold jewellery.

 

In a notification, the RBI said, “In order to standardise the valuation and make it more transparent to the borrower, it has been decided that gold jewellery accepted as collateral will have to be valued at the average of the closing price of 22 carat gold for the preceding 30 days as quoted by the Bombay Bullion Association (BBA)."

 

Currently, there is no standard method for arriving at the value of gold accepted as collateral and the valuation is arbitrary and opaque.

 

While accepting the gold as collateral, RBI said non-banking financial companies (NBFCs) should give in writing to the borrower, on their letterhead giving the purity (in terms of carats) and weight of gold.

 

If the gold is of purity less than 22 carat, the NBFC should translate the collateral into 22 carat and state the exact grams of the collateral. In other words, jewellery of lower purity of gold shall be valued proportionately.

 

The loan to value ratio for loans against jewellery will be 60%.

 

The notification further said NBFCs financing against the collateral of gold must insist on a copy of the PAN card of the borrower for all transactions above Rs5 lakh. High value loans of Rs1 lakh and above must only be disbursed by cheque. It also directed gold loan companies to standardised documentation across all branches.

 

"It has been decided that where the gold jewellery pledged by a borrower at any one time or cumulatively on loan outstanding is more than 20 grams, NBFCs must keep record of the verification of the ownership of the jewellery. The method of establishing ownership should be laid down as a Board approved policy,” the notification said.

 

The central bank has also prohibited NBFCs from issuing misleading advertisements like claiming the availability of loans in a matter of two-three minutes.

 

Noting that unbridled growth may not be in the overall interests, RBI has also tightened the rules for opening branches by such NBFCs.

 

“NBFCs, which already have more than 1,000 branches, may approach RBI for prior approval for any further branch expansion,” it said.

 

Besides, it said that no new branches will be allowed to be opened without the facilities for storage of gold jewellery and minimum security facilities for the pledged gold jewellery.

 

With regard to auction, the notification said that it should be conducted in the same town or taluka in which the branch that has extended the loan is located.

 

While auctioning the gold, the NBFC should declare a reserve price for the pledged ornaments, it said, adding that this should not be less than 85% the previous 30-day average closing price of 22 carat gold as declared by BBA.

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