Financial Daily from THE HINDU group of publications
Saturday, Nov 13, 2004
Financial Daily from THE HINDU group of publications Saturday, Nov 13, 2004 |
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Corporate
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Company Law ICSI seeks `complete Prohibition' on accepting deposits by defaulting cos Richa Mishra
New Delhi , Nov. 12 THE Institute of Company Secretaries of India (ICSI) has recommended to the Government to `completely prohibit' companies that are defaulting on repayment of deposits raised by them, from accepting or inviting any deposits. "No company should be allowed to invite or accept any deposit if the company is in default in repayment of the deposit or interest thereon and the default is subsisting," ICSI sources told Business Line. This would ensure that companies respect the depositors' interest. Noticeably, what have been prohibited in the Concept Paper for new Company Law are only the invitation of deposits and not the acceptance of deposits, the Institute officials said. "This implies that once having invited the deposits through the newspaper-advertisements, the company concerned can continue to accept deposits during the entire validity-period of its advertisement even if it is in default of the repayment of any deposit or any interest thereon," sources pointed out. Explaining further he said, the statutory prohibition against inviting deposits would be attracted only at the point of time when any fresh advertisement inviting deposits is required to be issued. The Institute has submitted the same in its comments on the Concept Paper called for by the Ministry of Company Affairs. To ensure increased compliance by the companies of various regulatory requirements, a provision should be made for institution of `Class Action Suits' against the defaulting companies both by the Government as well as the shareholders, debenture holders and deposit holders. On the issue of excessive delegation of power to the Centre as envisaged in the Concept Paper, the Institute has stated that it should be avoided. "As far as possible, substantive law should be laid down in the Act itself and only matters relating to procedures should be prescribed through Rules," the official said. Further, the Rules should be exposed to the public for comments for a minimum period of 45 days inviting suggestions thereto. ICSI may be involved in the consultation process while framing the Rules based on our experience in Company Law, the Institute has suggested. In tune with what the corporate sector on proposals for penalties, the Institute has recommended that for technical offences only monetary penalties should be prescribed while for offences where public interest is involved, imprisonment may be provided along with monetary penalties. In the liberalised business environment, it is felt that economic offences, should be dealt with in economic ways unless they are grave and involve public interest.
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