Financial Crime World

Liabilities for Risk and Compliance Management Deficiencies in Indian Undertakings

Companies operating in India must navigate a complex regulatory landscape to avoid liabilities arising from risk and compliance management deficiencies. This article outlines the various liabilities that undertakings in India may face, including civil liability, administrative/regulatory consequences, and criminal liability.

Civil Liability

Companies can be held liable for non-compliance with laws and regulations, resulting in penalties. The amount of penalty can vary from:

  • 50,000 rupees to 500,000 rupees: the range of penalty amounts that companies may face for non-compliance.
  • Up to three times the sum involved in the contravention: the maximum penalty amount that companies may be required to pay.

Administrative/Regulatory Consequences

Companies can face administrative actions such as:

  • Suspension, cancellation, withdrawal, or modification of licenses and permits: regulatory bodies like RBI, SEBI, IRDA, etc. can impose penalties on companies for non-compliance with regulations.
  • Penalties and disciplinary actions: regulators can take punitive measures against companies that fail to comply with laws and regulations.

Criminal Liability

Companies, directors, and other officers can be held criminally liable for offenses committed under various laws, including:

  • The Companies Act 2013: companies and their officials can face penalties for non-compliance.
  • Income Tax Act 1961: individuals and companies can face imprisonment for up to five years with a fine for tax evasion.
  • Customs Act 1962: companies and their officials can be held criminally liable for customs violations.
  • Central Sales Tax 1956: companies and their officials can face penalties for non-compliance.
  • Central Excise Act 1944: companies and their officials can be held criminally liable for excise duty evasion.

Liability of Governing Bodies and Senior Management

Members of governing bodies and senior management can face:

  • Civil liability: breach of risk and compliance management obligations can result in civil penalties.
  • Administrative or regulatory consequences: including penalties, disciplinary actions, and suspension of licenses and permits.
  • Criminal liability: in some cases, they can be held criminally liable for offenses committed under various laws.

In summary, undertakings in India face significant liabilities for risk and compliance management deficiencies, which can result in financial penalties, administrative consequences, and even criminal liability.