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MR PREM CHAND GUPTA, MINISTER FOR CORPORATE AFFAIRS

Richa Mishra

Critics called it the most nondescript portfolio for a Minister. But Mr Prem Chand Gupta, Minister for Corporate Affairs, has proved them wrong. From attaining the near impossible of introducing a revamped Companies Bill to replacing the Companies Act of 1956, from making the concept of Limited Liability Partnership a reality to the successful implementation of e-Governance projects, his stint has seen it all. He calls it a ‘satisfactory’ journey. But there were some unfinished tasks, such as making the Competition Commission of India fully operational. In an interview with Business Line, Mr Gupta shared his experience of changing mindsets in his four-year old Ministry.

Excerpts from the interview:

This used to be a department, but is now it is a full-fledged Ministry. How would you rate the last four years?

As far as my journey is concerned, I am absolutely satisfied. There were questions on whether the newly formed Ministry would find enough work. There was also the problem of the mindset of those who worked here. Changing it was not difficult.

What was more challenging was creating a knowledge infrastructure, which was achieved through the successful launch of the MCA-21 e-governance project, rebuilding the ICLS (Indian Company Law Service), and the creation of the Indian Institute of Corporate Affairs.

Strengthening the legal and regulatory framework, too, was a priority. We did not want to act like a regulator. We wanted to become a facilitator for the corporate sector. The intention is not to a give tough time to corporates but be co-operative at every stage. So, we made sincere efforts to provide corporates a level playing field and to ensure that the interests of all stakeholders are promoted and protected.

What prompted you to amend the Companies Act, 1956? Past attempts have failed. How long do you think it will take before the Bill becomes an Act? Do you think the corporate sector is ready to regulate itself, in the true sense of term? Do you think white-collar crime will be minimised?

We have to prepare ourselves for maintaining the growth momentum and accelerating it in the long run.

We can succeed only if our legal and regulatory framework is conducive, our delivery systems are comparable with the best in the world, and the right institutional mechanisms are in place. We felt there was a need for a law that is easy to understand and does away with redundant norms. The existing Act has been amended 25 times. What’s the point?

We started a wide consultative process, which included a concept paper, expert committees, and several meetings. So today we have a Bill that advocates self-regulation, with transparency and accountability.

We are liberalising company law and promoting self-regulation, but we are also ensuring that companies don’t take the law casually. The Bill provides for a minimum amount that would be applicable to defaults.

We have tightened the penal provisions. Besides, today, most corporates are aware of their responsibilities.

How long will it take? Difficult to answer. The consultation process is far from over. The Bill has now been referred to the standing committee. Though the committee has been given three months time, it is still a difficult task.

Self-governance brings up the issue of company-auditor relationship. There is also the question of how the CAs treat the cost auditors. Is giving them more autonomy the right decision?

Our chartered accountants are doing a fine job. To ensure full, fair and transparent financial reporting by corporates through a mechanism that is consistent with the best international practices, we have taken measures to create convergence with the International Financial Reporting Standards. We have also notified 29 accounting standards.

As regards extending more autonomy to the professional institutes — chartered accountants, company secretaries, and cost and works accountants — it was done to create more transparency and accountability.

Each profession has a defined task, and has to work within that mandate.

The amendments regulating the professional institutes have been made to give the professions greater autonomy.

The new regulations will enable them to set up multidisciplinary firms, thus making them ready to face global competition.

What about disclosure norms? How do you make companies answerable to the investor? Do you think it would restrict fly-by-night companies?

Disclosure in a balance sheet has always been an issue. Not only are we bringing our accounting standards in sync with IFRS, we have also prescribed auditing standards in the proposed law. It will define the disclosure norms through these instruments, including auditing. All I want the professionals to do is to improve their standards.

I agree that vanishing companies are a menace, but we have been able to create a lot of awareness among the investors. We have also been able to create a healthy corporate environment through e-governance. Today, investors know who the promoters or directors of a particular company are.

How about credit rating agencies? Can action be taken against them under the existing law?

I have two views on this. One is my personal view and the other is the one I have to take as part of the Government.

I agree that the credit rating system is not foolproof. It is defective and can be misused. This can always be corrected and improved upon.

Under the current dispensation it appears there is no specific provision in the Companies Act, to take action against rating agencies, as a rating is just their view, and it is up to the individuals to accept or reject it.

However, we within the Department are developing a new law on valuation professionals. Valuation plays a very important role in different business processes. At present, no recognised institution is available.

More Stories on : Interview | Company Law

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