Decriminalisation of section 276A of the Act

Union Budget 2023-24 + FINANCE Bill, 2023

Decriminalisation of section 276A of the Act

Section 276A of the Act makes provision for prosecution with rigorous imprisonment up to two years in the case of a person, being a liquidator who fails to give notice in accordance with sub-section (1) of section 178, or fails to set aside the amount as required by subsection (3) of the said section or parts with any of the assets of the company or the properties in contravention of the provisions of the said section.

2. It has been the stated policy of the Government to decriminalise minor offences as a step towards improving ease of business. In this regard, the provisions of the Act have been examined. Section 276A provides for prosecution of liquidator for non-compliance with section 178. Section also imposes personal liability on such liquidator for the same noncompliance. Further, with the operationalisation of the Insolvency and Bankruptcy Code, 2016 (IBC), waterfall mechanism for payment of dues is now in place for companies under liquidation and sub-section (6) of section 178 (the parent section) provides that this section shall not have effect when provisions of the IBC are in contrary. Moreover, the liquidator is now working under the oversight of this specific law.

3. In view of this, it is proposed to amend section 276A by providing a sunset clause on the section with effect from 31.03.2023. Hence, it is proposed that no fresh prosecution shall be launched under this section on or after 1st April, 2023. The earlier prosecutions will however continue.

4. This amendment will take effect from 1st April, 2023.

[Clause 118]

Full Text:

Union Budget 2023-24 + FINANCE Bill, 2023

Dated: 1-2-2023