India: Government constitutes Special Court for Speedy Trial of Company Law Offences in Bihar

September 12, 2017
ISSUE No. 19
September 12, 2017

India: Government constitutes Special Court for Speedy Trial of Company Law Offences in Bihar


Source: www.mcafeetaft.com


The Ministry of Corporate Affairs, vide notification number S.O. 2872 dated August 31[1] , 2017, has constituted a Special Court in Bihar to provide for speedy trial of offences under the Companies Act, 2013 (hereinafter referred to as the “Act”). The Special Court has been constituted in pursuance to Section 435 of the Act, which provides that the Central Government may establish or designate Special Courts to provide for speedy disposal of offences under the Act.

Legislative Intent of Section 435

A lot of scams have occurred in the corporate world in the past few decades. Delay in judgements affects the rights of the related parties of the companies. Section 435 was, therefore, introduced by the government to expedite the trial and disposal of cases which have piled up under the Act. As the Special Courts are exclusively constituted for companies, they are more effective and efficient than general Session Courts. Such a step is a welcome move to further improve the ease of doing business, enforce corporate governance and reduce the number of litigations pending at various courts.

Evolution of Section 435

Section 435 was envisaged in the Companies Act, 2013 to ensure speedy “trial of offences”. Later, the provision was amended vide Companies Amendment Act, 2015 to ensure “speedy trial of offences punishable under the Act with imprisonment of two years or more”.

Additionally, a proviso was added to Section 435 to state that all other offences shall be tried, as the case may be, by a Metropolitan Magistrate or a Judicial Magistrate of the First Class having jurisdiction to try any offence under this Act or under any previous company law.

Constitution of Special Courts

As per Section 435, Special Courts are constituted by the Central Government by appointing a single judge with the concurrence of the Chief Justice of the High Court within whose jurisdiction the judge to be appointed is working. A person shall be qualified for being appointed as a judge of a Special Court if such person is, immediately before such appointment, holding office of a Sessions Judge or an Additional Sessions Judge.

Accordingly, the Central Government, in concurrence with the Chief Justice of High Court of Patna, designated the Court of Additional District and Sessions Judge, Patna as Special Court for speedy disposal of offences which are punishable with imprisonment of two years or more.

Other States where Special Courts have been notified:

The Ministry of Corporate Affairs had notified, vide Notification number S.O. 1796 (E) dated May, 18, 2016[2] , Special Courts in the following 8 states/union territories: Jammu & Kashmir, Maharashtra, Dadra and Nagar Haveli and
Daman and Diu, Goa, Gujarat, Madhya Pradesh, Andaman and Nicobar
Islands, West Bengal.

Further, the Ministry of Corporate Affairs had notified, vide Notification number S.O. 2843(E) dated September 1, 2016[3] , Special Courts in the following states/union territories: Chhattisgarh, Rajasthan, Punjab and Haryana, Madras and Manipur.

[1]Available at http://mca.gov.in/Ministry/pdf/NotificationSpecialCourtBihar_


[2]Available at http://www.mca.gov.in/Ministry/pdf/NotificationOrder_1905


[3]Available at http://www.mca.gov.in/Ministry/pdf/Notification_0509

India: Ministry of Corporate Affairs notifies Companies (Arrests in connection with Investigation by Serious Fraud Investigation Office) Rules, 2017


Source: www.mca.gov.in


The Ministry of Corporate Affairs has notified the Companies (Arrests in connection with Investigation by Serious Fraud Investigation Office) Rules, 2017, vide notification G.S.R. 1062(E) dated August 24th, 2017 (hereinafter referred to as the “Rules”.

The Central Government enforced the Rules, in exercise of the powers conferred under sub-Section (1) of Section 469 read along with Section 212 of Companies Act, 2013.<

  • Section 469(1) – It grants power to Central Government to make rules for carrying out provisions of the Companies Act, 2013.
  • Section 212 – it deals with Investigation into affairs of Companies by SFIO. SFIO at instances, by order of Central Government make such investigation.

What is Serious Fraud Investigation Office (SFIO)?

As per the Companies Act, 2013, Serious Fraud Investigation Office (hereinafter referred to as “SFIO”) was established through the Government of India vide Notification NO. S.O.2005(E) dated July 21, 2015.

SFIO is a multi-disciplinary organization/team under Ministry of Corporate Affairs, consisting of experts in the field of accountancy, forensic auditing, information technology, law, investigation, company law, capital market and taxation for detecting and prosecuting or recommending for prosecution white-collar crimes/frauds. SFIO is headed by a Director, which is further assisted by Additional Directors, Joint Directors, Deputy Directors, Senior Assistant Directors, Assistant Directors Prosecutors and other secretarial staff. The headquarter being located a New Delhi, with 5 other Regional Offices at Chennai, Hyderabad, Mumbai, New Delhi & Kolkata

SFIO investigates serious cases of fraud as per the provisions of Companies Act, 2013, and forwards the investigated report to the concerned agencies for prosecution or appropriate action to be taken.

Provisions of “The Rules”

  • As per the Rules, the Director, Additional Director or Assistant Director may arrest any person, if while investigation they have reason to believe on basis of material in possession that such person has been guilty of any offence punishable. Prior written consent of the Director shall be obtained in case the arrest is being made by Additional Director or Assistant Director, as the Director is the apex authority for all decisions made.[1]
  • Prior written approval of Central Government shall be obtained where an arrest is to be made in connection with a Government Company or a Foreign Company, and the intimation of such arrest shall be given to the Managing Director or the person in charge of affairs of the Government Company, or to the Secretary of the administrative ministry if the arrested person is the Managing Director or the person in charge of affairs of the Government Company itself.[2]
  • At the time of arrest, an arrest order is made with the particulars of the arrest made such as details of arrestee, offence etc., and a personal search memo is sent to the address of the person arrested 
  • The Director, Additional Director or Assistant Director shall sign the arrest order along with personal search memo and serve it to the arrestee and obtain written acknowledgment.[3]
  • A copy of the arrest order, personal search memo, along with material in possession and other documents shall be forwarded within twenty four (24) hours to the office of Director, SFIO.[4]
  • Particulars of arrestee, date and time of arrest and other relevant information pertaining to the arrest are to be made in a register maintained at the office of Director. [5]
  • The office of Director, SFIO shall preserve the copy of arrest order together with supporting materials for a period of five (5) years from the date of judgement or final order of the Trial Court, or from the date of disposal of matter before final Appellate Order if the judgement or final order of trial court was impugned.[6]


[1]Rule 2

[2]Rule 3

[3]Rule 4

[4]Rule 5

[5]Rule 6

[6]Rule 8


India: The CCI amends Competition Commission of India (Lesser Penalty) Amendment Regulations, 2017


Source :www.cci.gov.in

The Competition Commission of India, vide its Notification dated August 22, 2017 has amended the Competition Commission of India (Lesser Penalty) Regulations, 2009 (“Leniency Regulations”). The Competition Commission of India (Lesser Penalty) Amendment Regulations, 2017 (“hereinafter referred to as the new regulations/ amended regulations”) provide for lesser penalty not only to the first three applicants, but also to subsequent applicants.

Introduction: The leniency policies adopted by Competition Commission of India and its counter parts all over the world, act as the most effective tools to detect, investigate and break cartels and restore healthy and free competition in the market. The amended Regulations have ensured more transparency and efficiency within the existing leniency laws.

Hard-core cartels constitute very serious violations of competition rules. They are often very difficult to detect and investigate without the cooperation of an insider. Leniency programmes are designed to give incentives to cartel members to take the initiative to approach the competition authority, confess their participation in a cartel and aid the competition law enforcers. The aim is to drive a wedge at the heart of a cartel through its trust and mutual benefit.[]

Cartels: Cartel formation is an arrangement by way of which the competitors in the market decide to ‘cooperate’ instead of competing. Together by market sharing, price fixing or bid rigging etc., they freeze market competition and discourage other players from entering into the market or increasing their profitability. Hardcore cartels were defined in the OECD Recommendation of the Council Concerning Effective Action against Hard Core Cartels, 1998 as “…anticompetitive concerted practice(or arrangement), by competitors to fix prices, make rigged bids (collusive tenders), establish output restrictions or quotas, or share or divide markets by allocating customers, suppliers, territories or lines of commerce.”

A cartel is the most draconian form of anti-competitive arrangement, not only because it is very difficult to detect or because it freezes the competition in the market, but because it heavily contributes to sky-high inflations levels subsequently leading to low living standards and a recessive economy. It is this very mischief of not being detected, that has given rise to the lesser penalty regimes all over the world. Once an application for lesser penalty is made by a member of the cartel the cartel can be investigated and broken.

The gravity of cartelization can be put into accurate perspective upon a bare perusal of Section 27 of the Competition Act, 2002 (“hereinafter referred to as “the Act”), which provides for a penalty of more than three times of the amount of profits made out of such agreement by the cartel or 10% of the average of the turnover of the cartel for the last preceding 3 financial years, whichever is higher.

These new Regulations have introduced many positive changes to the existing leniency regime which are discussed below:

  • Definition of Applicant: Under the new Regulations, the definition of an Applicant includes individuals also. According to Section 2(b) of the Regulations an “applicant” means an enterprise, as defined in clause (h) of section 2 of the Act, who is or was a member of a cartel and includes an individual who has been involved in the cartel on behalf of an enterprise, and submits an application for lesser penalty to the Commission. The Applicant no more needs to be an enterprise only, even an individual connected with the enterprise can be the Applicant.
  • A Party for or against whom inquiry or proceeding can be instituted shall include an enterprise or person or the Central Government, any State Government or any statutory authority and shall also include any person permitted to join the proceedings. This brings more entities within the ambit of parties who can be connected with the proceedings.
  • According to Rule 3 of the Regulations provides for various conditions which the applicant has to satisfy for being eligible for lesser penalties. Another condition has been added to the existing criteria that is that where the applicant is an enterprise, is shall provide the names of individuals who have been involved in the cartel and for whom the lesser penalty is sought.
  • Leniency for the First Applicant: The first applicant making vital disclosure by submitting evidence of a cartel shall be granted reduction of penalty by 100% However, such information or disclosure shall be of such nature so as to enable the Commission to form a prima-facie opinion regarding the existence of a cartel which is alleged to have contravened the provisions of section 3 of the Act and the Commission did not, at the time of application, have sufficient evidence to form such an opinion. Also, vital information can be disclosed to the Commission which can aid in establishing contravention of Section 3 of the Act, even in matters under investigation for which sufficient evidence was not available with the Commission before.
  • Applicants may also be granted benefit of reduction in penalty on making a disclosure by submitting evidence, which in the opinion of the Commission, may provide significant added value to the evidence already in possession of the Commission or the Director General.
  • No limitation on number of applicants: Under the old regulation, the first applicant would be granted up to 100% reduction in penalty and the second applicant up to 50% while the third applicant would be granted up to 30% reduction in penalty. Unlike the erstwhile regulations, where the reduction of penalty was granted only to the first three applicants, the amended rules do not provide for this restriction.
    It is notable that the erstwhile regulations were strict, in the sense that the concerned cartel members were forced to file an application of a lesser penalty on a priority basis-at the earliest hour, so as not to miss out on the penalty condonation by virtue of not being amongst the first three applicants. This deterrence will cease to exist, now that applications can be filed ‘at will’. On the brighter side though, now the applicants will not be discouraged to file the application ‘sooner or later’ as they will no more carry the risk of being the fourth applicant and lose out on the penalty condonation!
  • Confidentiality: According to the amended Rule 6 the following information received under the Competition Commission of India (General) Regulations, 2009 by the Commission or the Director General shall treat as confidential:

      • the identity of the applicant;

      • the information, documents and evidence furnished by the applicant under regulation
      This information may be disclosed only when:

      • such disclosure is required by law, or

      • the applicant agrees in writing or

      • the applicant himself discloses.

  • Recordal of Reasons before disclosure: Further, according to Section 6A, if the applicant does not agree to the disclosure of the documents and evidence brought to the Commission through his application, the Director General cannot disclose the same without recording reasons for such disclosure in writing and the seeking approval of the Commission. Further, the Director General must disclose such information only when it is in furtherance of an investigation. An additional provision for the inspection of documents has also been added to regulate the inspection of documents disclosing confidential information in a non-confidential version.

[1]UNCTAD/DITC/CLP/2016/3. http://unctad.org/en/PublicationsLibrary/ditcclp2016d3_en.pdf


The Goods and Services Tax (Compensation to States) Ordinance, 2017 receives Cabinet’s nod.

Source :www.lawctopus.com

The Union Cabinet has given its approval to the proposal of the Finance Ministry to promulgate an ordinance to suitably amend the Goods and Services Tax (Compensation to States) Act, 2017.

Due to the Cabinet’s approval to the ordinance the maximum rate at which the Compensation Cess can be levied will increase from 15% to 25% for the following businesses:

  • motor vehicles for transport of not more than thirteen persons, including the driver [falling under sub-headings 870210, 8702 20, 8702 30 or 8702 90]; and
  • motor vehicles falling under headings 8703.

It is notable that after the passing of this ordinance, taking into consideration the fact that post introduction of GST, the total incidence on motor vehicles [GST+ Compensation Cess] has come down vis-a-vis pre-GST total tax.

The GST Council shall examine the issue regarding the increase in effective rate of Compensation Cess on motor vehicles in its future course of action.


India: Supreme Court finds installation of CCTV cameras in all subordinate Courts and Tribunals desirable

Source :supremecourtofindia.nic.in

In the recent order dated August 14, 2017, in Pradyuman bisht vs Union of India & Ors. (IA 10142/2015 arising out of Writ petition(s) (criminal) no(s). 99/2015), the Division Bench of Hon’ble Supreme Court comprising of Hon’ble Mr. Justice Adarsh Kumar Goel and Hon’ble Mr. Justice Uday Umesh Lalit, while recalling its earlier order which was initially to install CCTV cameras in two districts in every State/Union Territory, directed that it is desirable to install CCTV cameras in all subordinate courts and tribunals in such phased manner as may be considered appropriate by the High Courts. The order came on a petition moved by a man, who had sought audio-video recording of the trial proceedings of his matrimonial dispute to ensure a fair trial and that he was even willing to bear the expenses of installing such cameras.The

Hon’ble Supreme Court vide its order dated March 28, 2017 had directed, that at least two districts in every State/Union Territory (with the exception of small states/Union Territories where it may be considered to be difficult to do so by the concerned High Courts) CCTV Cameras (without audio recording) may be installed inside the courts and at such important locations of the Court complexes as may be considered appropriate. Monitor thereof may be in the Chamber of the concerned District and Session Judge. Location of the district courts and any other issues concerning the subject may be decided by the respective High Courts.

The Hon’ble Supreme Court had further clarified that the footage of the CCTV Camera will not be available under the R.T.I. and will not be supplied to anyone without permission of the concerned High Court. Further directed that the installation may be completed within three months from the date of the order and a report of such experiment be submitted within one month of such installation by the Registrar Generals of the respective High Courts to the Secretary General of the Supreme Court may have it tabulated and placed before the Supreme Court.

The Supreme Court pursuant to the said directions, has now received the reports from High Courts of Sikkim, Bombay, Andhra Pradesh, Orissa, Meghalaya, Chhattisgarh, Tripura, Punjab and Haryana, Allahabad, Patna, Rajasthan and Gauhati and noted that the CCTV cameras have already been installed in the jurisdiction of the eight High Courts while in the remaining four High Courts installation process is in progress. However, no reports have been received with regard to the remaining twelve High Courts.

Order of the Supreme Court:

  • The Hon’ble Supreme Court after perusal of the report opined that, installation of CCTV Cameras will be in the interest of justice and any apprehension to the contrary needs to be repelled.
  • The Court noted that the Union of India has not installed CCTV camera in Tribunals where open hearing takes place like Court such as the Income Tax Appellate Tribunal (‘ITAT’), Customs, Excise and Service Tax Appellate Tribunal (‘CESTAT’), etc., and opined that the tribunals stand on the same footing as far as objective of CCTV cameras are concerned.
  • The Court advocated that the aspect of installing CCTV cameras in Tribunals, be taken up by the learned Additional Solicitor General with the concerned authorities, so that appropriate direction is issued by the concerned authority for installation of CCTV cameras in Tribunals in same manner as in Courts and an affidavit filed in the Court.
  • The Court opined that recordings will help the constitutional authorities and the High Courts exercising jurisdiction under Articles 226 and 227 of the Constitution over such Tribunals.
  • The Court observed that in the report there is a variance about the cost of installation of CCTV cameras and there is no uniform technical specifications which has been prescribed. Hence, the Hon’ble Supreme Court accordingly directed that the Ministry of Information and Technology in consultation with E-Committee of Supreme Court to lay down technical specifications and other modelities, including price range and sources of supply for installation of CCTV cameras in Courts.
  • The Court further directed to comply with the same within the period of one month from the date of the order and directed that such information be provided to all the High Courts. Furthermore, the duration for which audio and video recordings may be retained may normally be three months, unless otherwise directed by any High Court.
  • Further, the Court opined that they have already incorporated safeguards that the footage of recording will not be given for any purpose other than the purpose for which the High Court considers it appropriate and also reiterated that R.T.I provisions will not apply to CCTV camera recordings as per Order dated March 28, 2017.


It seems to be a significant move by the Apex Court to end the opacity and to increase the transparency in the proceedings before the Courts.

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