We are looking to reduce compoundable offences under NCLT: PP Chaudhary

The government is planning to add more courts to the National Company Law Tribunals (NCLTs) to augment their capacities and expedite the insolvency and bankruptcy proceedings of companies. As many as three courts will be added in Delhi and four in Mumbai apart from some other places. Similarly, 36 members are being recruited to the courts. The Union Minister of state for Corporate Affairs PP Chaudhary in an interview with Anjul Tomar spoke about strengthening NCLTs, decriminalising certain offences to ease burden on the courts and dealing with a recent spate of auditor exits. He also spoke about his ministry's continuous efforts to weed out 'shell' companies.

India Inc has been witnessing rising instances of auditors quitting audit work, raising questions about corporate governance. How is the government looking at it?

Auditors of as many as 204 listed companies have resigned between January 1 and July 17 this year, as per the MCA-21 filings. We are examining the cases. The matter will be taken up with the company and the auditor if the reasons mentioned by the auditors warrant further inquiry. Auditors at the time of resigning have to file with the concerned Registrar of Companies (ROC) an e-form (ADT-3) in which they are required to furnish the reasons.

The Ministry of Corporate Affairs (MCA) is probing crisis-hit Jet Airways. What are the allegations against the airline?

The airline is being investigated for alleged financial irregularities. The ministry has ordered the inspection of books and papers of Jet Airways under Section 206(5) of the Companies Act, 2013 on August 30.

What is the status of the probe against the companies related to ICICI Bank CEO's husband Deepak Kochhar?

The inspections are under progress. The ministry had ordered the inspection of books and papers of six firms- NuPower Renewables, Videocon Industries, Supreme Energy, Pacific Capital Services, NuPower Wind Farms and EchandaUrja.

How is the government planning to strengthen the NCLTs amid rising number cases coming in the wake of Insolvency and Bankruptcy Code?

The government has decided to increase the number of courts and recruit 36 members for speedy disposal of cases. NCLT courts are being set up in a phased manner, keeping in view the workload. More than one court has already started functioning at the places where the number of cases is comparatively high. More are in progress. The process to recruit members at the NCLT has also started. Applications have been invited for the posts of 22 technical and 14 judicial members. Meanwhile, the government is also considering to declog the NCLT by reducing the number of compoundable cases by bringing in suitable amendments in the rules.

What are the major offences proposed to be moved away from the NCLTs?

The government-appointed committee submitted a report after a review of the existing mechanism of penalty under the Companies Act. The panel has recommended shifting 16 out of 81 compoundable offences to an in-house adjudication mechanism. These include non-filing of annual returns and financial statements within specified time, failure to file statement after resigning as auditor of a firm, accepting directorships beyond specified limits, managerial remuneration in case of inadequate profits, failure to inform about a change in share capital and issuance of shares on discount. The panel has suggested re-categorisation of these offences and placing them under the in-adjudication framework. Such defaults would be liable for penalty. The government is examining the report.

When is the National Financial Reporting Authority (NFRA) likely to start functioning?

The government is in the process of appointing a chairperson and three full time members to NFRA. The consultations are going on with stakeholders to finalise technical rules.

The ministry has started examining top 1,000 companies for CSR expenditure. How many companies have failed to spend 2% profits on Corporate Social Responsibility (CSR) and what action has been taken against them?

The ministry has recently set up Centralised Scrutiny and Prosecution Mechanism (CSPM) to examine the records of top 1,000 firms which are mandated to spend on CSR. The ministry after an inquiry has sent preliminary notices to 272 companies for violations committed during 2015-16. In the previous year, penal action was initiated against 254 companies in this regard.

What is the latest action being taken against 'shell' companies and their directors? Do you think there is a need for stricter norms to deal with the menace of 'shell' firms?

In the latest action against the companies which have not been doing any business for more than two years, names of nearly 55,000 firms have been struck off by the Registrar of Companies (RoCs) during the last month under Section 248 of the Companies Act, 2013. During this fiscal, the RoCs have so far identified 2.26 lakh companies for not filing their financial statements or annual returns for two years in a row. The RoCs had struck off a similar number of companies and disqualified over three lakh directors during 2017-18 over non-filing of financials. The action against them is taken on a continuous basis. Until now, 14,000 firms have offered to become compliant while 30,000 directors have been reinstated under the Condonation of Delay Scheme. The scheme, which ran from January to May this year, gave them a chance to file returns and financial statements.