Full transcript:
Sir, I rise to speak on the Companies (Amendment) Bill, 2014. I don’t want to inflict a long speech on the Finance Minister. As it is, he is looking tired at the end of a long day, wearing three hats in three Ministries. So, I would be very brief. The Corporate Affairs Minister has brought 14 amendments to the Companies Act, 2013. The main purpose of his Bill is to improve the ease of doing business. A World Bank Report sometime back said that ease of doing business in India, India was ranked at 142 among 189 countries. So, people found that it is difficult to do business here, which is why the Minister is thinking of bringing this Bill. As early as October, the Finance Minister has said that we are getting innumerable requests to amend the Companies Act. So, he has brought this Bill with two purposes. Mainly in the face of innumerable requests from the corporate world, business classes, Chambers of Commerce and to make the business easy. Here, I would like to differ with him in the sense that I spoke on the comprehensive Company Laws Bill which was brought by my young friend, Shri Sachin Pilot, who is not in this House any more. I thought that the overall effort was commendable. But I had said, and I would say again as to what is the touchstone of a good Companies Bill. To me, there are two touchstones because in recent times, corporate world has been shaken by two incidents.
One is the Satyam case in which the value of shares of the company was shown in an inflated way and it was found that in Satyam case, auditors had faulted and had not given a proper report. I just saw two days back that Shri RamalingaRaju has received punishment of six months in prison. Maybe, he would receive more punishment. My second touchstone is this. Whether this Bill helps to eliminate chit fund companies and cheating of small investors by companies listed as such? Because we have seen the collapse of not only Saradha and Rose Valley in West Bengal but such collapses are also taking place all over the country. Will the Bill strengthen the Government’s stand in resisting, in avoiding such collapse which put millions of people at risk? Of course, we have the problem of investors’ democracy, education of investors, and I am not going into the nitty-gritty and details. To my mind, Mr.Jaitley after several months of deliberations has come up with this Bill. It does not satisfy these two touchstones. This is not at all a comprehensive Bill which we expected with comprehensive amendments from a noted corporate lawyer like Shri ArunJaitley.
That is why, I would point out small defects in the Bill. He has said that the ease of doing business is alright. Let me point out several problems with regard to the Bill. The amendments include replacing special resolution with ordinary resolution for approval of related party transaction by minority shareholders. This means that companies need only to have the consent of 50 per cent of the minority shareholders present instead of 75 per cent which is prescribed under the law. Now this reduces corporate democracy. Let me cite the case of United Spirits. Recently, a Special Resolution moved by the liquor maker United Spirits, through postal ballot, to approve four related party transactions was defeated by minority shareholders as it did not satisfy the 75 per cent provision. If the proposed amendment had been there, the Resolution would have been passed. So, in that sense, the power of the minority shareholders is reduced in this new amendment. I am sure the Minister would explain that. The new amendment also empowers the audit committee to give omnibus approval for related party transactions on an annual basis. They say that it is in line with the SEBI Policy to increase the ease of doing business.
The other point that I would like to make is regarding related party transactions. Heeding to the corporate demand again, the new amendment also proposes to exempt related party transactions between holding companies and wholly owned subsidiaries from the requirement of the minority shareholders’ approval. In all these cases, the power or rights of the minority shareholders are reduced. I would like the Minister to explain this while replying. There is another provision which prohibits a public inspection of Board Resolutions filed with the Registrar of Companies. It is said that company professionals have been complaining to the Ministry that Board Resolutions, if made public, would reveal the company strategy thereby helping the competitor inadvertently. But this is against transparency. Now, Company Board Resolutions will not be seen by anybody else. They say that competitors might get advantage. But I do not think it is a strong enough reason. The other thing I want to say is regarding fraud. Fraud reporting has been made limited in this amendment. Earlier, a provision was there which ensured that frauds which are beyond a certain threshold would compulsorily need to be reported by the auditors to the Government. Any such fraud which is above the threshold will also need to be disclosed in the Board Report. Now, here again, the auditor is given a leeway that below a certain threshold, he need not report the fraud to the Government; whether it is good or bad or whether it will control frauds as it happened in Satyam’s case, the Minister would be able to tell us.
Originally, the Government had said that all the hindrances in doing business can be removed by just amending certain provisions of the Act for improving the business environment in the country. Mr.Moily has given an overall picture of the economy of the country. The main problem is, manufacturing sector is not growing. It is almost stagnating. This is a matter of serious concern to the Minister. So, after this amendment is passed, we would like the economy to grow to the promised level of 8 per cent. Now we are at 5.3 per cent only. I would like to know how this ease of doing business is going to really improve the growth in the manufacturing sector. Sir, Mr.Mayaram was the Finance Secretary earlier and he has been removed now. After this Government took over office, he said a very interesting thing where he tried to speak about the philosophy of the Government. He said: “I believe our potential growth rate is 8 per cent. And to get there, we need to develop resources. And that which we cannot generate domestically must come from outside and if it comes from outside then we prefer it in the form of Foreign Direct Investment (FDI) rather than Foreign Institutional Investment (FII),”
This summarizes the philosophy of the Government. They will run the Government for five years. Only time will tell whether with this policy, whether with these amendments to the Companies Act, we shall be able to make business easier, whether we will be able to achieve growth rate, whether we will be able to improve manufacturing and whether we will create more jobs.
With that, I end my speech.
Thank you, Sir.
