A Stitch in Time Saves the Nine
Prevention is always better than cure, but this principle is not adhered to when it comes to ensuring of compliances. In India people are very reluctant towards legal and statutory compliances. We may state that compliance is an obligation having recognition of law which needs to be fulfilled by a person and non-fulfillment will attract consequences. It is observed that in the Inspector Raj of today people prefer to manage the Inspector rather than following the proper course of action. Managing Inspector is like keeping active and hidden landmines or time bombs which may explode anytime once the Inspector is changed and in due course of time, these explosives are constantly getting enriched in their intensity. The best solution is to identify them and get them defused.
Now the Companies Act, 2013 has made it mandatory to have a robust compliance system in place. In India we have observed in the last few decades if there any problem Government will pass a new Act with that a new regulator is created under that Act leading to complication of things. In practice, it becomes very difficult to abide by the law and achieve the commercial target of the industry. The corporate executives generally prefer to keep the non-compliances alive and as a solution try to manage the Inspector. It is not so that they do not want to abide by the law rather in the absence of adequate information or proper guidance the non-compliances are getting created. If properly guided and robust compliance system is in place followed by a regular audit, then this unnecessary expense of managing Inspector is taken away and above all the confidence of being compliant is a priceless achievement.
The most pertinent question coming into mind is that, isn’t it incurring cost? The answer to this is that the cost of non-compliance is higher and the most lethal consequence is the destruction of reputation. Industrial reputation earned over decades and even centuries in certain exceptional cases are lost within no time. To corroborate this example of one famous multi-specialty corporate hospital of Pune may be cited. In this hospital, the doctors had shown no medical negligence but failed to maintain records as required under the Pre-Conception and Pre-Natal Diagnostic Techniques Act, 1994 which led to the arrest of the doctors followed by prosecution. Hence the principle of managing the Inspector did not work. In another case, an MNC in FMCG products acquired a factory at Kodaikanal not realizing the fact that the predecessors had not followed the protocols and compliances for disposing of mercury an industrial raw material used for their product. Proper due diligence was not done and the liability for non-compliances passed to the acquiring MNC. This tarnished the ages-old reputation of the MNC. Finally, there was an instance where the Hon’ble Supreme Court imposed a fine of Rs. 100 crores on a company for not following environmental norms and the fine did not immune the company from any other claims maintainable against it.
 SLP (C) Nos. 28116-28123 of 2010, judgment dated 2nd April 2013