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In what could be music to the ears of foreign investors, the Government has now said that not every corporate ‘fraud’ will face ‘bail restrictions’.
The Companies (Amendment) Bill passed in the Lok Sabha on Wednesday proposes to relax the norms in the existing Act so as to mention that only those “fraudulent” actions that squarely fell under the definition of a “fraud” would invite “bail restrictions”.
Many corporate law experts see this move as bringing clarity to the legislative intent while some view it as clear dilution of earlier stance.
Terming it an “oversight” by the erstwhile UPA regime, Arun Jaitley, Minister for Finance, Corporate Affairs, and I&B, said the provision (Section 212) in the new company law was a direct lift from the POTA law, which was enacted by the National Democratic Alliance in 2002.
Such Prevention of Terrorism Act (POTA)-type provision had no place in a Company Law, Jaitley said in his reply to the discussions on the Companies (amendment) Bill in the Lok Sabha.
He said some of the provisions in the existing company law had made it extremely difficult for doing business in India and that the new regime was looking to correct the situation. “Nobody will come here to set up a business if such an environment persists,” said Jaitley.
There is no other ulterior motive in bringing about the 14 amendments to the existing company law, he added.
The Lower House later passed the Bill through a voice vote. The Opposition demand that the Bill be referred to the Standing Committee was rejected by the Government.
The Companies (amendment) Bill has brought in 14 Amendments to the company law enacted last year.
Through these amendments, four categories of changes are being introduced – some with intention of improving the ease of doing business; some to correct existing drafting errors; some to tackle the oversight issues and lastly some to address the oppressive provisions in the law.
Jaitley also clarified that the Government had decided to remove the minimum capital for private and public companies so as to align the country with international practices.
He also defended the Government’s stance on not allowing public inspection of board resolutions filed in the Registry.
On “fraud reporting” by statutory auditors, Jaitley said a threshold will be specified by the Corporate Affairs Ministry and all frauds above this threshold will have to be reported to the Union Government.
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