Govt taking steps to reduce pending litigations under companies law Finance Minister

NEW DELHI: The Ministry of Corporate Affairs (MCA) has taken several steps, including the withdrawal of prosecutions and compoundable cases, to reduce litigations under the companies law, Finance Minister Nirmala Sitharaman said Monday.

Sitharaman, also the Union Minister of Corporate Affairs, said in Lok Sabha that 14,247 prosecutions were withdrawn in the first special drive conducted in 2017 and a decision has also been taken for withdrawing 7,338 compoundable cases identified in the second special drive in 2023.

"Till July 15, 2024, a total of 6,294 applications for withdrawal have been filed before various courts. However, serious or non-compoundable offences will continue to be prosecuted," she said in Lok Sabha.

The minister said the MCA has taken several steps to review pending prosecutions in various courts. In 2017 and later in 2022, a committee of senior officers of the ministry was set up to give recommendations on withdrawal of prosecutions.

The objective was to free judicial courts from dealing with offences that are procedural and technical in nature to ensure that such courts are able to focus on serious offences, Sitharaman said, adding it was envisaged that cases of procedural and technical nature may be handled through an adjudication process.

She said that to improve ease of doing business and enhance corporate governance, the MCA has taken several major steps including decriminalisation of 63 offences under the Companies and Limited Liability Partnership (LLP) Acts.

She said one of the objectives of decriminalisation has also been reduction of litigation burden in judicial courts and shifting the prosecution cases towards adjudication.

Zero fee for incorporation of company with authorised capital up to Rs 15 lakh, setting up of a centralised registrar of companies (CRC) for incorporation, setting up of a Central Scrutiny Centre (CSC) for centralised scrutiny of e-forms filed under Straight Through Process (STP), conversion of more than 50 forms to STP which earlier required approval of field offices, setting up of a Central Processing Centre (CPC) for centralised processing of specified non-STP e-forms are some of the steps taken by the government, she said.

The minister said definition of small companies has been amended by increasing the threshold limit of a small company, having a paid-up capital not exceeding Rs 4 crore and turnover not exceeding Rs 40 crore. Similarly, the concept of small LLP has been introduced which is subject to lesser compliances, lesser fee to reduce the cost of compliances.

The government has also extended the fast track process for mergers under the Companies Act, 2013 to include mergers of startups with other startups and with small companies, so that the process of mergers and amalgamations is expedited, she said.