E-adjudication of company law breaches from 16 September

Adjudication of offences related to the Companies Act and the Limited Liability Partnership Act will entirely be in virtual mode from 16 September, marking a big shift in the way officials of the ministry of corporate affairs enforce compliance.

Under the Companies (Adjudication of Penalties) Amendment Rules, 2024,  all proceedings by registrars of companies (RoCs) and regional directors will now take place in electronic mode and only through the e-adjudication platform developed by the government.

This includes issuing of notices, filing of replies, documents and evidences, holding of hearings, attendance of witnesses, passing of orders, and payment of penalty.

The move, an effort to improve ease of doing business and efficiency in governance, eliminates the requirement of physical interface between officials and company representatives. 

With about 180,000 new companies and about 70,000 limited liability partnerships getting added to the official registry every year, policy makers expect e-adjudication to make governance simpler given that virtual decision-making has become the norm in the post-pandemic world. 

E-adjudication is being implemented through the revamped MCA-21 platform, built by LTIMindtree Ltd, a Larsen & Toubro group company. 

At present, the authorities communicate with company officials through physical letters, although some officials also email scanned copies of letters for fast delivery. 

Once the new system is rolled out, adjudication on violations are expected to get fast-tracked, enabling businesses to spend less time and resources on these matters, including on travelling for physical hearings and proceedings. 

The system will take care of authentication of documents, recording of statements and other legal proceedings involved in adjudication.   

Ease of doing business

Introducing e-adjudication is a significant shift towards digitalisation in corporate compliance and governance processes and enables ease of doing business in India, said Sandeep Sehgal, partner-tax, at AKM Global, a tax and consulting firm.

“Such e-adjudication will effectively result in faster dispute resolutions, reduced costs for corporations, and lesser administrative burden due to reduced paperwork for all the stakeholders involved,” said Sehgal.

After two rounds of decriminalisation of the Companies Act in 2019 and 2020, more than four dozen procedural lapses and breaches were brought under the adjudication of RoCs, enabling inhouse processing of cases without having to go to over-burdened tribunals and courts.

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The e-adjudication platform aims to simplify adjudication, improve stakeholder experience using technology and reduce the time taken by professionals for appearing before officials,  explained Noorul, partner at law firm Lakshmikumaran and Sridharan.

“It will promote transparency and accountability, allowing for effective tracking of the adjudication timeline. It will also contribute to a smoother and more accessible experience for companies and professionals, enhancing overall ease of doing business,” said Noorul. 

Companies can be encouraged to address issues of non-compliance remotely from their offices, benefiting their in-house legal teams to appear and complete the adjudication process. Overall, this initiative aligns with the government’s goal to implement e-adjudication across various departments, said Noorul. 

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