Corporate Laws Bill:
JPC seeks NFRA jail rollback as dissent flags fresh criminal liabilities
Sep 17, 2026
Panel wants imprisonment removed for failure to comply with NFRA orders or pay penalties while retaining criminal fine; dissent note raises wider concerns over new criminal consequences in a Bill aimed at decriminalisation.
The Corporate Laws (Amendment) Bill, 2026 is facing fresh scrutiny over the consistency of its decriminalisation agenda after the Joint Parliamentary Committee recommended dropping a proposed jail term for certain National Financial Reporting Authority defaults, while a formal dissent note separately raised concerns over the introduction of new criminal liabilities in the same legislative exercise.
The JPC has recommended removing imprisonment for failure to comply with an NFRA order or failure to pay a penalty imposed by the authority, while retaining the criminal fine.
The committee observed that the proposed provisions were “not aligned with the larger objective of decriminalisation”.
Separately, formal dissent recorded in the committee report raised broader concerns over provisions that introduce new criminal liabilities despite the Bill's stated objective of reducing criminalisation of corporate law violations.
The issue could become significant as the government moves towards the next stage of the legislation, which seeks to recast the enforcement and compliance framework under the Companies Act, 2013 and the Limited Liability Partnership Act, 2008.
NFRA jail provision comes under committee scrutiny
The Bill originally proposed an additional enforcement consequence under Section 132 of the Companies Act for specified defaults involving NFRA.
The proposed provision covered a person who fails to comply with an order of NFRA or fails to pay a penalty imposed by the authority.
The Bill provided for imprisonment, fine and a further period of debarment for such defaults.
The JPC has recommended removing the imprisonment component while retaining the criminal fine.
The committee's recommendation is significant because the Bill's broader architecture seeks to replace criminal consequences for several corporate law violations with civil penalties.
JPC flags conflict with decriminalisation objective
The committee has specifically linked its NFRA recommendation to the larger policy objective of decriminalisation.
The JPC observed that the proposed provisions concerning failure to comply with an NFRA order and failure to pay an NFRA penalty were “not aligned with the larger objective of decriminalisation”.
It therefore recommended that imprisonment be removed while the criminal fine be retained.
If the recommendation is retained in the final legislation, the specified NFRA defaults would continue to attract a criminal fine but would not carry the proposed imprisonment.
The recommendation does not remove NFRA's underlying regulatory and enforcement powers.
Dissent raises wider criminal liability concerns
The NFRA recommendation sits alongside a separate concern recorded through dissent within the committee.
Two members of the 31 member committee submitted formal dissent notes.
The dissent material included concerns over the Bill's extensive use of delegated legislation and the introduction of new criminal liabilities despite its wider decriminalisation objective.
The dissent notes examined a range of provisions beyond NFRA and raised concerns about the extent to which important policy choices were being left to executive rule making.
The dissent also questioned the introduction of fresh criminal liabilities in a Bill whose stated approach is to reduce criminalisation of corporate law violations.
The two issues should be viewed separately. The JPC's recommendation on the NFRA imprisonment provision is a committee recommendation, while the broader concern over new criminal liabilities forms part of the dissent recorded by members of the panel.
Bill seeks wider shift from criminal to civil penalties
The Corporate Laws Bill proposes to decriminalise several offences under the Companies Act and the LLP Act.
The proposed framework replaces criminal consequences with civil penalties for a range of procedural and compliance related defaults.
These include specified failures to furnish information or documents, violations relating to books of account and failure to comply with certain requisitions of the Registrar.
The stated legislative approach is to reduce the use of criminal sanctions for procedural defaults and move towards a more proportionate monetary penalty framework.
The NFRA provision stood out because it proposed imprisonment for two specified regulatory defaults even as the Bill was moving several other corporate law violations away from criminal punishment.
That distinction prompted the JPC to examine the provision against the Bill's wider decriminalisation objective.
NFRA powers still set for expansion
The committee's recommendation on imprisonment does not amount to a rollback of the broader expansion of NFRA's powers proposed in the Bill.
The Bill seeks to expand NFRA's enforcement framework, including provisions relating to advisory, censure and warning measures and additional professional training in specified circumstances.
It also proposes changes to the manner in which NFRA investigations are conducted.
The Bill had proposed that while the class of companies or bodies corporate to be investigated would be prescribed by the Central Government, the manner of investigation would be specified through regulations made by NFRA.
The JPC recommended deleting this proposed change and retaining the Central Government's power to prescribe the manner of investigation through rules.
For CFOs, directors and auditors, the distinction between regulatory enforcement and criminal liability is significant.
The proposed removal of imprisonment would reduce the potential criminal exposure associated specifically with failure to comply with an NFRA order or failure to pay an NFRA penalty.
However, the retention of a criminal fine means the committee has not recommended making these defaults purely civil in nature.
Decriminalisation faces a consistency test
The NFRA provision has brought a broader issue in the Corporate Laws Bill into focus.
The legislation seeks to reduce criminal penalties for procedural and compliance related corporate law violations. At the same time, it creates or retains criminal consequences in selected areas where stronger enforcement is considered necessary.
The JPC's recommendation indicates that the choice of punishment must be consistent with the broader legislative objective.
The dissent adds another layer to the debate by questioning whether new criminal liabilities should be introduced within a legislative exercise whose central policy direction is decriminalisation.
For India Inc, the final outcome will determine whether the new corporate law framework draws a clearer line between civil compliance penalties, criminal fines and imprisonment.
The government's next legislative move will therefore be closely watched by companies, CFOs, directors, auditors and other professionals covered by the proposed changes.
[ET CFO]
