Recently, the Ministry of Women and Child has initiated the process to make mandatory disclosure related to composition of Internal Complaints Committees (ICCs) which deals with sexual harassment in companies under the provisions of Companies Act, 2013.
Maneka Gandhi, Union Minister, Women and Child Department in a recent event stated her displeasure regarding the fact that the ministry is receiving multiple complaints of sexual harassment from all over the country and that the companies have failed to implement the provisions of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.
The penalty provision under the Sexual Harassment of Women at Workplace Act is a paltry amount of INR 50,000 which can be peanuts if imposed on the company. This seems to be an insignificant amount to act as a deterrent for the companies.
In order to ensure that the private companies are constituting ICCs in their organisations, the Ministry of Women and Child has asked the Ministry of Corporate Affairs (MCA) to notify appropriate rules under section 134 of the Companies Act, 2013 which will require companies to disclose the composition of ICC committees in the Director’s Report, which has significant penalties and consequences.
Interestingly the above compliance requirement is not something new; similar compliance requirement was always present under the Companies Act, 2013. This notification will only make the compliance requirement clearer and more detailed.
This compliance requirement would not be something surprising or out of the blue for the students of the Executive Certification in Sexual Harassment Prevention and Workplace Diversity or for the clients of our students who have been made aware of the existing provision which requires companies to declare compliance with the sexual harassment law under the provisions of Companies Act. Let’s understand what the existing provisions lay down.
What is already present under the law?
Under the Companies Act, directors are supposed to furnish a “Responsibility Statement” as part of the Board’s Report (on an annual basis). As per Section 134(5) (f), the Directors have to declare that they have devised proper systems to ensure compliance with the provisions of all the applicable laws and such systems were adequate and operating effectively.
Can directors declare this in their statement if their company is non-compliant with anti-sexual harassment?
Can directors declare that the systems are adequate and operating effectively if the compliance is just paper-based?
If only form filings and reporting is made but effective information and training to employees and complaints committees is not given, can the systems be adequate and operating effectively?
What are the new provisions?
Rather than a general statement that the company is complying with all applicable laws (which includes the Sexual Harassment Law), companies would now require companies to specifically state the composition of the members of ICC in the Board Report.
What are the penalties for non-compliance with the above provision?
Here comes the bomb – penalty for violation of this responsibility is INR 50,000 to twenty-five lakhs. Every officer in default will be punishable with imprisonment up to 3 years. Scary, isn’t it?
This is not enough. Section 164 of the Act states that a person punished for an offence exceeding 6 months’ imprisonment cannot be appointed as a director for a period of five years. This means that if by chance, a director is sentenced to imprisonment for more than 6 months for such a violation, he or she cannot be appointed as a director again for 5 years. This is not required to be kept confidential either. Imagine the impact on his or her career.
This is also a point of caution for all directors, including independent directors. Many companies have appointed lawyers, sexual harassment law consultant on their board, who will need to note this.
With increasing compliance requirements under the sexual harassment law, there has been an increase in need for compliance professionals who are well aware about the new law. Companies are finding it difficult to find well trained consultants who can help them with 100% compliance of the new law or can be on the panel of ICCs.
Want to build a career as an independent professional or consultant in helping companies comply with sexual harassment laws and ensure a harmonious and diverse workplace? Take a look at India’s only executive certification on Sexual Harassment Prevention and Workplace Diversity, started by National University of Juridical Sciences (NUJS), one of the top 3 law universities in India.
Are you compliant with the new sexual harassment law? If you have not complied with the law and looking for an effective, accessible and super-fast way to comply with law, you can take up this course and help your company implement a better policy.