Amendments to companies law passed to ensure stringent action against defaulters
The Lok Sabha on Thursday passed a Bill to amend the companies law seeking to strengthen corporate governance standards, initiate strict action against defaulting companies and help improve the ease of doing business in the country.
Piloting the Companies (Amendment) Bill, 2016, Minister of State for Corporate Affairs Arjun Ram Meghwal also said that NSEL and PACL scams were a legacy of the previous regime, which the current government is trying to address.
The Bill, which was passed by a voice vote, provides for more than 40 amendments to the Companies Act, 2013, which was passed during the previous United Progressive Alliance (UPA) regime.
The Bill was introduced in the Lok Sabha in March 2016, and then referred to the Standing Committee on Finance. After taking into consideration, the recommendations of the panel, the Cabinet had cleared a revised Bill in March this year.
The Companies Act, 2013 has already been amended once under the present government.
“The passage of this Bill will help in increasing the size of the country’s economy,” Meghwal said, adding that investor protection and corporate governance were the two main objectives of the measure.
It would also help in simplifying procedures, make compliance easy and take stringent action against defaulting companies, he said.
Replying to the discussion on the Bill, Meghwal sought to allay concerns raised by some opposition members that the latest amendments would dilute the objectives of the Companies Act, 2013.
“We have not done that (diluting the law),” the minister said in response to concerns expressed by some members and stressed that the Bill would provide relief for small investors.
The amendments would strengthen corporate governance standards and improve transparency. It would also help in improving the country’s position in the ‘ease of doing business’, Meghwal told PTI after the House passed the Bill.
Asserting that the country’s capital market was in a healthy condition, the minister told the Lok Sabha that various agencies, including the Serious Fraud Investigation Office (SFIO), are working to curb the black money menace.
Rejecting apprehensions that the trust in the capital market has been broken, Meghwal said had that been the case, how was the Sensex crossing the 32,000 mark.
Sensex is the 30-share benchmark index of leading stock exchange BSE.
Responding to concerns that the government was not doing enough to ensure that companies comply with Corporate Social Responsibility (CSR) provisions, the minister said it was not the right.
The ministry has already issued notices to many firms for not complying with CSR provisions under the Companies Act and in some instances they have not responded, Meghwal said.
Under the Act, certain class of profitable companies are required to shell out at least two per cent of their threeyear annual average net profit towards CSR activities. In case of non-expenditure, such entities are required to provide the reasons for it to the ministry.
Listing out various initiatives, including implementation of the goods and services tax (GST), the minister said 2017 would be the year of economic reforms.
Congress leader K V Thomas said the Bill would dilute many stringent provisions of the Companies Act, 2013 and those provisions were put in place to ensure that scams such as Satyam, Saradha and Sahara are not repeated.
Bharatiya Janata Party’s (BJP’s) Kirit Somaiya said the present government was ensuring ‘ease of doing business’ while the earlier UPA government had made it “easy for business” as a result of which many shell companies were set up between 2004-2014.
He also claimed he had a list of 529 such shell companies which are associated with several politicians including chief ministers.
When Trinamool Congress’s (TMC’s) Sougata Roy sought to counter Somaiya, the BJP MP said if he revealed the names then the TMC leader’s party will be in a spot.
Biju Janata Dal’s (BJD’s) Bhartruhari Mahtab said the process of fine-tuning the Act seems to have no end and wondered: “Whether we should continue amending the Act?”
He said the government was only interested in economy and money while the social fabric is torn apart. Most of the problems of the banking sector can be traced to poor corporate governance practices, he added. “Law is as good as it is administered. Companies Act, 2013 is a modern law for rising India. It is important that administration has a mindset keeping in spirit with such a law,” Mahtab noted.
Telugu Desam Party’s (TDP’s) Jayadev Galla said that in view of the rising non-performing assets (NPAs), the banks were asking for personal guarantees for loans and expressed concern that the “business dynamics of our country will be at risk if guarantee is insisted every time.”
While, Telangana Rashtra Samithi’s Konda Vishweshwar Reddy stressed that there was a need for stricter regulations and these should not be relaxed.
Without naming beleaguered businessman Vijay Mallya, Reddy said that “King of good times was fishing in some island in Britain.” The shell companies, he said, were “alive, kicking, doing well” and carrying out illegal operations.
He also posed a volley of questions to the minister asking whether the NPAs were declining, have Hawala operations gone down, has the rupee gained value, has the country’s gross domestic product (GDP) improved?
Badruddoza Khan of the Communist Party of India (Marxist) said the Central Bureau of Investigation probe into the Saradha chit fund scam was moving very slowly and no efforts were being made to refund the money of the public.
BJP’s Subhash Chandra Baheria said there should be harsh penal provisions so that gullible investors are not cheated of their hard-earned money.
Speaking on penal provision, Congress’s Rajiv Satav said maximum penalty of ~1 crore was not sufficient for large companies, while Sikkim Democratic Front’s P D Rai suggested that bankers’ responsibility should be fixed in case of loans turning into NPAs.