Ministries Clash Over Judicial Powers Of Dca

The provision regarding granting penal powers of civil courts to DCA officials in the Companies Act amendment bill has become a bone of contention between Union minister of law, justice and company affairs M Thambi Durai and the finance ministry. While Thambi Durai is all for vesting DCA officials with quasi-judicial powers in the name of investor protection, the finance ministry is staunchly against the idea as it feels such a move goes against the atmosphere of progressive deregulation.

The earlier cabinet note that had been circulated to various ministries for consideration contained a proposal to impart DCA officials with quasi-judicial powers to summon officials, enforce attendance, requisition documents, examine under oath and prescribe penalties for non-compliance of orders. "The policy of deregulation needs a machinery to tackle investors' complaints," the department had explained. The finance minsitry had opposed such a move.

The sparring has continued even in the recent draft cabinet note that has been finalised after incorporating suggestions from various ministries. Even though the recent department note submitted to Thambi Durai suggests that "proposals regarding vesting powers of the court to the officers of this department to summon and examine under oath etc may be deleted," such a move is unlikely to be supported by the minister who has thrown in his lot behind investor protection, sources said.

In its suggestions to the earlier note, the finance ministry had advised that "the proposal to vest officers of this department would be extra-ordinary powers which may not be necessary when there is already a quasi-judicial body like CLB." But DCA officials contend that these powers are exactly similar to the search and seizure powers accorded to customs, excise and I-T officials, and hence can hardly be deemed "extra-ordinary". "Even the language of the provision is exactly similar to the IT Act provision," an official pointed out. "The truth is that the finance minsitry just doesn't want any other department to have such powers."

According to finance ministry, the Registrar of Companies (RoC) already has powers to call for information or explanation from companies under section 204 of the Comapnies Act 1956. If the comapnies fails to do so, they can be prosecuted by the RoC in court. "Also, RoC has powers under section 209 A to carryout inspection without giving previous notice," the ministry officials have pointed out in their suggestions to the note.

DCA officials think otherwise. "To proceed against even the smallest infringement, we first have to file a court case. The magistrate takes his own time, and then fines Rs 100. This does not impose the serious nature of the offence on the mind of the defaulter," an official points out. "Besides, the powers under section 209 A are applicable only when inspection has been directed. There are around three lakh companies in the country, and we can inspect only 250-300 in a year at best. According to department sources, the minister feels that inspection and prosecution takes a long time and do not grant the officials with the flexibility needed to promptly react to investors' complaints.