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 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 procesures, make compliance easy and take strigent 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 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 3-year annual average net profit towards Corporate Social Responsibility (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 like Satyam, Saradha and Sahara are not repeated.
Kirit Somaiya (BJP) said the present government is 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 that he has a list of 529 such shell companies which are associated with several politicians including chief ministers.
When Sougata Roy (TMC) sought to counter Somaiya, the BJP MP said if he revealed the names then the TMC leader's party will be in a spot.
Bhartruhari Mahtab (BJD) said the process of fine-tuning the Companies Act 2013 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.
Jayadev Galla (TDP) 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."
Konda Vishweshwar Reddy (TRS) 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 GDP improved.
Badruddoza Khan (CPI-M) said the CBI probe into Saradha chit fund scam was moving very slowly and no efforts were being made to refund the money of the public.
N K Premchandran (RSP) said the bill has disproportionate penal provisions and there was no provision to enforce the CSR provisions. "The government has given too much flexibility to corporates in the name of ease of doing business," he said.
Expressing concern over the working of the government, he said all slogans of the NDA government in the last three years are only on paper and not in practice. He claimed that "except the three parameters in the ease of doing business, all other parameters have worsened".
Subhash Chandra Baheria (BJP) said there should be harsh penal provisions so that gullible investors are not cheated of their hard-earned money.
Speaking on penal provision, Rajiv Satav (Congress) said maximum penalty of Rs 1 crore is not sufficient for large companies, while P D Rai (SDF) suggested that bankers' responsibility should be fixed in case of loans turning into NPAs. "Each time we come to know about NPA, it is promoters or people who are linked to companies are taken to task but never has the MD of a bank been taken to task," Rai said.