Corporate Regulatory Compliance in India | Supreme Court Cases
Regulatory
and Compliance Actions in Corporate
Understanding Major Regulatory Authorities in India, Compliance Framework
& Supreme Court Jurisprudence
Blog by:
Jayprakash B. Somani,
Advocate, Supreme Court of India & IP,
Cell: PA 9322188701
www.jayprakashsomani.com
www.supremecourtlawfirm.com
Webinar
Objective
After attending this webinar, participants should
understand:
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India's corporate regulatory ecosystem.
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Functions of major regulatory authorities.
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Corporate governance and statutory compliance.
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Investigations, inspections and enforcement
actions.
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Consequences of non-compliance.
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Directors' liabilities.
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Important Supreme Court principles.
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Practical compliance strategies.
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Recent developments.
PART
I
Why Regulatory Compliance Matters
Today's corporations operate under multiple regulators.
A company may simultaneously be regulated by:
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MCA
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ROC
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SEBI
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RBI
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CCI
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Income Tax
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GST Authorities
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CPCB/SPCB
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EPFO
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ESIC
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FSSAI
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Customs Authorities
Failure to comply may lead to:
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heavy penalties
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prosecution
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imprisonment
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cancellation of licences
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director disqualification
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freezing of bank accounts
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attachment of properties
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reputational loss
Golden Principle
Compliance is far less expensive than litigation.
Corporate
Regulatory Pyramid
Board of Directors
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Corporate Governance
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Statutory Compliance
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Regulatory Audit
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Inspection
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Investigation
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Adjudication
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Appeal
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Supreme Court
PART
II
Ministry
of Corporate Affairs (MCA)
Governing Law
Companies Act, 2013
LLP Act, 2008
Functions
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Incorporation
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Corporate governance
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Directors
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Annual filings
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Investigation
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Mergers
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Winding up
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CSR
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NCLT administration
Important Sections
Section 3
Incorporation
Section 92
Annual Return
Section 96
Annual General Meeting
Section 129
Financial Statements
Section 134
Board Report
Section 135
CSR
Section 139
Auditors
Section 143
Audit Powers
Section 166
Duties of Directors
Sections 206–209
Inspection and Inquiry
Section 210
Investigation
Section 212
Serious Fraud Investigation Office (SFIO)
Section 447
Fraud
Example
Company diverts shareholders' money.
MCA orders investigation.
SFIO investigates.
Directors prosecuted.
Registrar
of Companies (ROC)
Powers
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Inspection
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Calling information
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Show Cause Notices
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Compounding
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Strike Off
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Director disqualification
Important Sections
248
Removal of company
164
Director disqualification
167
Vacation of office
Example
Company fails to file annual returns.
ROC strikes off company.
Serious
Fraud Investigation Office (SFIO)
Established under
Section 211
Companies Act
Power under
Section 212
Investigates
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Accounting fraud
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Diversion of funds
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Shell companies
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Corporate scams
Major punishment
Section 447
Fraud
Up to 10 years imprisonment in serious cases.
PART
III
Securities
and Exchange Board of India (SEBI)
Governing Laws
SEBI Act,1992
SCRA
Depositories Act
SEBI Regulations
Functions
Protect investors
Develop securities market
Regulate stock exchanges
Prevent insider trading
Monitor listed companies
Important Powers
Section 11
Protect investors
Section 11B
Directions
Section 15
Penalties
Section 24
Criminal prosecution
Major Regulations
LODR
PIT Regulations
Takeover Regulations
Mutual Fund Regulations
Example
Company insider purchases shares before merger
announcement.
SEBI investigates.
Penalty imposed.
Leading Supreme Court Case
SEBI v. Rakhi Trading Pvt. Ltd., (2018) 13 SCC
753
Facts: Alleged synchronized and manipulative
trades in the securities market.
Held: The Supreme Court upheld SEBI's action,
emphasizing that trades creating a false or misleading appearance of market
activity undermine investor confidence and market integrity.
Principle: Market manipulation and artificial
trading practices attract regulatory action even if executed through seemingly
legitimate transactions.
PART
IV
Reserve
Bank of India (RBI)
Governing Laws
RBI Act
FEMA
Banking Regulation Act
Payment and Settlement Systems Act
Regulates
Banks
NBFCs
Foreign Exchange
Payment Systems
Digital Payments
Example
NBFC violates RBI directions.
Licence cancelled.
Penalty imposed.
Important Powers
Issue Directions
Inspection
Penalty
Licence cancellation
Leading Supreme Court Case
Internet and Mobile Association of India v. RBI,
(2020) 10 SCC 274
Facts: RBI circular restricted entities
regulated by it from dealing with virtual currency businesses.
Held: The restriction was set aside on the
ground of proportionality, while affirming RBI's broad regulatory authority
over the financial system.
Principle: Regulatory measures must be
proportionate and supported by relevant material.
PART
V
Competition
Commission of India (CCI)
Governing Law
Competition Act, 2002
Objectives
Prevent
Cartels
Monopolies
Abuse of Dominance
Anti-competitive Agreements
Important Sections
Section 3
Anti-competitive Agreements
Section 4
Abuse of Dominance
Sections 5 & 6
Combinations
Section 19
Inquiry
Section 26
Investigation
Section 27
Penalties
Example
Cement manufacturers form cartel.
CCI imposes heavy penalty.
Leading Supreme Court Case
Competition Commission of India v. Steel Authority
of India Ltd. (SAIL), (2010) 10 SCC 744
Principle: Orders directing investigation are
administrative in nature at the preliminary stage, and the statutory scheme of
the Competition Act must be followed before appellate intervention.
PART
VI
Income
Tax Department
Governing Law
Income-tax Act, 1961
Important Provisions
Assessment
Reassessment
Search
Survey
Penalty
Prosecution
Important Sections
147
Reassessment
132
Search
133A
Survey
271
Penalty
276C
Wilful Tax Evasion
Example
False invoices.
Search conducted.
Penalty.
Prosecution.
Leading Supreme Court Case
Vodafone International Holdings BV v. Union of India,
(2012) 6 SCC 613
Principle: In cross-border transactions, tax
authorities must respect the legal structure of genuine transactions unless the
statute clearly provides otherwise.
PART
VII
GST
Authorities
Governing Laws
CGST Act
IGST Act
SGST Acts
Important Sections
