Should corporate procedural lapses be crimes or civil penalties? Critically evaluate in light of the push to decriminalise company law.

In 1926, seven TISCO directors were criminally convicted for missing the 15-month AGM deadline, and each was fined just Rs. 5 [1]. The same limit survives in Section 96(1), Companies Act, 2013 [2]. The real question is not whether to punish such lapses, but which forum makes the penalty proportionate and enforceable.

Case for retaining criminal liability

• Deterrence and stigma: a conviction hurts a director's reputation. A quiet penalty notice risks becoming a cost of doing business for powerful promoters.
• Procedural ≠ trivial: a lone shareholder in 1926 could win only on a dated, provable procedural duty [1]. Such rules are often the minority shareholder's only enforceable weapon.
• Scope creep: MPs opposed the 2020 amendment and sought Standing Committee scrutiny. The government said it covered only "technical and procedural" defaults [3]. Once "procedural" becomes a category, firms will lobby to widen it.

Case for civil penalties

• Proportionality: the 1926 criminal trial yielded Rs. 5 [1]. Treating the lapse as a crime did not make the punishment fit it.
• Speed and decongestion: the 2018 review committee shifted 16 of 81 compoundable offences to in-house e-adjudication [4]. The Company Law Committee, 2019 proposed moving 23 more, omitting 7 and making 11 fine-only [5].
• Gravity-based line: serious non-compoundable offences, such as fraud, remain criminal [5]. About 50 of 81 compoundable offences now stand decriminalised [6].
• Trust-based governance: the Jan Vishwas Bill, 2022 extended this approach across 42 laws [7].
• Easier compliance: the Corporate Laws (Amendment) Bill, 2026 proposes renaming Section 99 a "Penalty" and allowing video-conference AGMs [8].

Evaluation

• Decriminalisation is sound for process lapses. Criminal courts are slow and blunt, and a prompt civil penalty enforces compliance better.
• The concern about deterrence is valid. So penalties must be large enough to hurt, adjudication orders must be public, and prosecution must stay available for wilful or repeated default.

Procedural lapses should therefore be civil wrongs by default, not crimes. A graded regime that starts with a civil penalty and keeps criminal prosecution for wilful default can ease business without weakening shareholder protection. This balance serves the goal of accountable institutions under SDG 16. The century-old rule on holding AGMs would then be enforced reliably rather than only occasionally.