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The government has tried to give some relief to the companies by providing some clarifications in the new Companies Act amendment which was passed by the Lok Sabha on Wednesday.
The government has introduced a provision of introducing the bail restriction only in case any fraud has been committed under Section 447 of the Companies Act, 2013.
According to the section 447, any person accused of fraud will not get a bail directly and has to go in court to follow his case. Public prosecutor gets a chance to present his case and the judge needs to be convinced that the accused will not commit any crime while on bail. Only in the case the judge is convinced after the hearing, the accused gets bail.
"It is almost like acquitting somebody before even the case starts," said a senior company professional.
The Companies Act, 2013, has various sections where there is the reference to Section 447 in case any crime is has been committed by anybody.
Now the government has clarified that the aforementioned bail restrictions will be applied only for offence relating to fraud under section 447.
"The government has just given a clarification; there is no major relief," said the senior company professional quoted above.
The government has also tried to reduce the load on judiciary. In this amendment, the "winding up cases" of companies will now be heard by a two member bench instead of a three member bench.
Also, the special courts will be involved only in cases where the accused is charged with offences which have the penal provisions of two years imprisonment or more.
