Private Firms

The right to raise deposits from the public should not be available to private companies since they are family-concerns and glorified partnerships. Section 43A(1C) of the Companies Act, 1956 prohibits such private companies. But, the working draft of the Companies Bill, 1997 has overlooked this area while scrapping section 43A.

Punitive mechanism under present legal provisions hardly deters defaulters. The aggrieved depositor is not empowered to prosecute the erring company-managements. They dare to defy the Company Law Board/Tribunal directions to pay-up to the depositors because they know that the punishment to be meted out after lapse of a long period will be negligible. The Companies Bill, therefore, should evolve effective punitive mechanism embodying strict penal provisions.